The European Union's new members in eastern Europe, which have spent 16 years on the hard road of economic reform, understand the difficulties west European countries now face.

Usually, it has taken a crisis to force change in the east, as happened in 1989-91. When conditions have improved, as they have since the late 1990s, the pace has generally eased.

International competition has driven reform. In Slovakia, when Mikulas Dzurinda's government took power in 1998, it raced to make up the ground lost under its authoritarian predecessor, Vladimir Meciar. Rapid reforms have transformed Slovakia from laggard into leader in attracting foreign investment.

Policies have been copied across borders, notably the flat tax pioneered in Estonia and imitated in Slovakia and elsewhere. But there are limits to the thirst for reform. The Czech Republic and Hungary have consistently failed to curb budget deficits. In Poland, the liberal Civic Platform this week lost the election to the conservative Law and Justice party, partly because voters rejected Civic Platform's tax plan.

Last year's accession to the EU of eastern European countries has reduced incentives for further reform. But reasons for change remain significant. Eastern Europe remains poor, with average incomes of less than half west European levels. Most politicians realise that without further reforms, boosting economic growth will be difficult. But selling this message to voters is hard.

Joining the euro remains an important external incentive. Six new EU member states have entered the exchange rate mechanism 2, the eurozone's two-year ante-chamber Lithuania, Latvia, Estonia, Slovenia, Cyprus and Malta. All expect to join in 2007 or 2008, although some face challenges meeting the economic entry tests.

Central European states have met greater difficulties, particularly in cutting fiscal deficits to the required level of 3 per cent of GDP.

Hopes of joining the euro in 2007 or so have given way to more leisurely plans. The Czech Republic this month changed its target from 2009-10 to 2010. Hungary, which originally planned to be among the euro's early adopters, is also aiming for 2010. In Poland, the PiS does not plan on adopting the euro before the next election in late 2009. Only Slovakia, which is aiming for 2009, has started talks on ERM2 entry.

Nor is business in a hurry. Otto Sinko, chief executive of Videoton, Hungary's largest domestic electronics manufacturer, says: “The major question is not the timing, but at what rate Hungary joins the euro area …Seeing all the turbulence happening now, I am not really sad that joining the euro is moving farther and farther away.”

For the moment, the financial markets accept these delays. Eastern European interest rates fell close to euro levels in 2004 and remain low. But Charles Robertson, an economist at ING, the Dutch bank, warns this may not last if entry is repeatedly postponed.

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