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Lithuania hits eurozone inflation hurdle: central bank

Inflation is likely to prove the key hurdle to Lithuania's eurozone entry, the Baltic state's central bank said on Monday.

"We will not meet the price stability criterion either in 2012 or in 2013," senior bank official Ruta Rodzko was quoted as saying by the Baltic News Service.

As a result, Lithuania is set to have to wait until 2014 to get a green light to adopt the euro the following year.

The country's incoming coalition government, led by the centre-left Social Democrats, has already said that Lithuania's currency, the litas, is likely to be swapped for the euro only in 2015.

The previous centre-right Conservative government, ousted by austerity-weary voters in last month's general election, had been eying entry in 2014, albeit without setting a formal target.

In its latest macroeconomic forecasts released on Monday, the central bank said that average annual inflation was projected at 3.2 percent for this year and 2.8 percent in 2013 due to faster growth in prices for food, fuel and industrial goods.

The previous forecasts had been 2.9 percent and 2.4 percent respectively.

Average inflation is a key measure used to assess a country's eligibility for adopting the euro.

A would-be eurozone member must keep the rate within 1.5 percentage points of the average of the three best performing European Union countries -- a level of 2.9 percent in October.

Inflation narrowly put paid to Lithuania's original plan to adopt the euro in 2007, because it was one-tenth of a percentage point over the bar.

The measure is one of the European Union's Maastricht criteria for switching to the euro, which also include debt and deficit levels, and have been roundly breached by most members of the 17-nation currency bloc.

In addition, would-be eurozone members must show that their economies are on a sustainable path, and over the past five years Lithuania has swung from a breakneck boom into a spectacular recession and back into growth.

The Social Democrats and their allies havepledged to pursue fiscal discipline in order to bring the Baltic state into the eurozone.

Like the defeated Conservatives, they argue that makes sense to join the monetary bloc because the Lithuania's main trade partners are already members.

The central bank also revised its 2013 economic growth forecasts downwards to 3.1 percent from the previous 3.4 percent, but upheld its 3.0 percent projection for this year.