BRUSSELS (Reuters) - Lithuania meets all the criteria for joining the euro, the European Commission said on Wednesday, clearing the way for the small Baltic state to become the 19th member of the single currency from the start of next year.
To adopt the euro, a country has to have government debt no higher than 60 percent of gross domestic product, a budget deficit below 3 percent of GDP, low inflation and interest rates and its own currency has to be stable against the euro.
Out of the 28 countries in the European Union, only Britain and Denmark do not have to adopt the euro because they have negotiated formal opt-outs.
All the others are obliged to switch to the single currency at some point provided they meet the criteria. The Commission assesses such compliance every two years in what it calls a convergence report.
"The 2014 Convergence Report concludes that Lithuania meets the criteria for adopting the euro. As a consequence, the Commission is proposing that Lithuania adopt the euro on 1 January 2015," the Commission said.
The formal decision to accept Lithuania into the euro zone will be taken by EU finance ministers in the second half of July, at which point the ministers will also agree on a conversion rate of the litas currency into the euro.
The remaining seven countries that still remain outside the euro zone -- Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania and Sweden -- do not meet all of the criteria to adopt the currency.
With the addition of Lithuania's 3.4 million people, the euro zone will have a total population of 336 million people and a GDP of approximately $9.5 trillion. The single currency was launched in 1999 and started trading as notes and coins in Europe Jan. 1, 2002.
(Reporting By Jan Strupczewski; editing by Luke Baker)