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BRUSSELS -- Lithuania's biggest retailer, VP Market, spent months preparing software, registers and accounts in its 195 stores for what looked like a sure bet -- the tiny Baltic country of 3.6 million adopting the euro in January.

Lithuanian gross domestic product is increasing by more than 7%, public debt remains minimal and the government budget is in surplus. But last week, the European Commission rejected Lithuania's euro application, blaming the country's 2.7% inflation rate, which is 0.04 percentage point above the limit set under EU rules.

"Disappointment," is VP Chairman Gintaras Marcinkevicius's reaction. "Lithuanian indices are good, and actually all requirements have been satisfied," he says.

He isn't the only one disappointed. Millions of businesses, people and politicians on the outskirts of this £¿0 trillion ($13 trillion), 25-nation trading bloc and 12-nation euro zone are rethinking their plans as Brussels becomes tougher on letting newcomers into the European Union's club. On the day it rejected Lithuania, the Commission postponed approval of Romania and Bulgaria entering the EU in 2007. Earlier this month, it broke off membership talks with Serbia over its inability to arrest and hand over war-crimes suspect Gen. Ratko Mladic.

But the EU officials getting tough on newcomers want more enlargement. They believe the promise of EU membership in 2004 prompted former Soviet bloc countries like Poland and Hungary to move faster toward free-market democracies and that the same thing will happen to the Balkans and Turkey. Olli Rehn, the Finn who runs the union's enlargement office, promises a "European perspective" for the poor western Balkan countries almost every time he speaks. Most Brussels civil servants support welcoming Turkey, a Muslim ally and future thruway for gas coming from the Black and Caspian seas.

Yet these same officials can't deny political reality. Public-opinion polls show citizens of older EU members like France and Germany are skeptical about enlarging the bloc. In the latest Commission poll, released May 6, 80% of Germans believe further EU enlargement would hurt their labor market, a view shared by 63% of all Europeans. There were other worrying numbers, too: 68% of French say the EU is moving in the "wrong direction," compared with 19% who say it is going in the "right direction." Only 49% of EU citizens say belonging to the EU is "a good thing" and 47% believe globalization is a threat, compared with 37% who say it is an opportunity.

The pollsters surveyed people like 24-year-old biology student Susanne Rauchmann in Berlin. "Jobs could be taken away," she says about enlargement. "It's problematic that Germany is the main financial source for the EU, and other countries still require a lot of money for things to change."

Analysts say the Commission needs to demonstrate sensitivity to these doubters. "They want to show they have the process under control" for when they do pursue enlargement, says Gergana Noutcheva, an analyst at the Centre for European Policy Studies, a Brussels think tank.

Ten days after the May poll was published, the Commission released lukewarm reports on Romania and Bulgaria, both of which signed membership treaties in 2003. While killing eventual membership is improbable -- it would require unanimous approval of all 25 EU members -- the treaty allows a one-year delay to 2008 for failing to meet EU standards.

The Commission was supposed to deliver its verdict on whether the two countries were ready last week. It put off its approval until this autumn, indicating several areas of "urgent concern."

"Unless the countries take immediate corrective action, they will not be ready," Mr. Rehn told the European Parliament in Strasbourg.

In its report, the Commission criticized Bulgaria for its failure to crack down on corruption and for "limited progress" in the fight against drugs. More than 100 Mafia-style contract killings in Bulgaria since 2001 remain unpunished. "The success rate in prosecuting crimes often linked to organized crime such as money laundering, counterfeiting, human trafficking of human beings, prostitution and drug smuggling is still very low," the report said.

Romania's warning was more technical, reflecting its relative progress in fighting corruption. Romania, the Commission said, needs to reorganize three offices that oversee farming and farm subsidies, and modernize an antiquated value-added-tax collection system.

Both Balkan applicants played down the delay, noting they were sure to get in by at least 2008. A delay carries more significance for the war-torn countries of the western Balkans and Turkey, which have all been promised membership some time during the next decade and have started changing their economies and legal systems to meet EU standards.

Here, too, the Commission is strengthening its language. On May 3, Mr. Rehn called off membership talks with Serbia after the government failed several times to turn over Gen. Mladic, accused in the murder of 8,000 Bosnian men and boys at Srebrenica in 1995.

Croatian officials are worried that they might be lumped with Turkey and their prospects delayed or put off, says Nives Malenica, spokeswoman for the Croatian mission to the EU in Brussels.

The negative tone is spilling over onto Turkey's application, too. Ankara needs to urgently push ahead with political overhauls and open its ports to Cypriot vessels to ensure rapid progress with its membership negotiations. At a meeting Friday with Turkey's top negotiator, Ali Babacan, Mr. Rehn stressed the need to enhance freedom of expression, respect of fundamental freedoms under antiterror laws, religious freedoms and cultural rights.

"There is a sense of urgency," Mr. Rehn said. "It is now the time for Turkey to regain the momentum of reforms." Mr. Babacan said his government was committed to enacting the necessary political overhauls.

While the Commission's positions might satisfy skeptics on the street, they weaken the EU's hold over the Balkans and Turkey. The prospect of membership has caused these volatile countries to implement democratic, free-market overhauls. Without a decent shot of joining, they could backtrack.

Tensions over enlargement extend beyond admitting new members; they include how to include existing members in the most ambitious projects, beginning with the common currency.

All EU members are meant by treaty law to get the euro, which means the euro zone eventually will have to include poorer countries with large populations like Poland, Hungary and the Czech Republic.

European policy makers have been frustrated by the euro zone's inability to catch up with the rest of the world. Economic expansion last year was 1.3%, less than a third of the 4.5% registered for the world. The euro zone is plagued by high taxes, obstacles to cross-border mergers and protectionist attitudes. Inflation and expansion rates have varied throughout the euro zone, making it difficult for the European Central Bank to set a coherent interest-rate policy.

"The euro is a currency in search of a single market," former competition commissioner Mario Monti said in a speech Thursday at the Brussels Economic Forum, a two-day conference of policy makers and business people.

Facing this unfinished business, policy makers are hesitant to throw open their doors to weaker countries. Slovenia, the former Yugoslav republic of two million that last week won approval to join the euro, is too small to pose any kind of threat. So is Lithuania.

By rejecting Lithuania's application, the Commission aims to set a firm standard for bigger economies when they join in the years after 2010. "This isn't about Lithuania," says Katynka Barisch, an economist at the Centre for European Reform, a London think tank. "It's about Poland and Hungary."

While Slovenians celebrated last week, Lithuanians were furious at the news, which triggered a downgrade on the country's outlook to "stable" from "positive" by Standard & Poor's Ratings Services. In a strongly worded letter sent to Commission President Jos¨¦ Manuel Barroso and European Central Bank President Jean-Claude Trichet, Prime Minister Algirdas Brazauskas wrote he felt his country had been "taken hostage" by EU criteria.

The EU's inflation benchmark should be rounded off to 2.7% from 2.66%, and Lithuania let in, says Gytis Marcinkevicius, a diplomat with the Lithuanian mission to the EU in Brussels. Finance ministers could agree and override the Commission when they meet in July. That is unlikely, EU officials say, because euro-zone finance ministers are as conservative as the Commission.

Lithuanian officials contrast their experience with the votes by governments in the late 1990s to allow Italy, Greece and Belgium into the euro zone, even though those countries' debts were above the legal limit of more than 60% of GDP -- and still are.

Since 2002, France and Germany have for years violated the rule against annual deficits of more than 3% of GDP, while the 25 governments have voted against fines proposed by the Commission as the law sets forth. Another source of Lithuania's wounded pride is that the EU's inflation cap was calculated using inflation data from the three countries with the lowest price rises in the bloc: Sweden, Poland and the Netherlands. The first two aren't even in the euro zone. Using only euro-zone countries, Lithuania would pass.

Lithuanian leaders worry that with oil prices rising, and robust economic expansion, their inflation will accelerate in 2008, further delaying adoption of the euro.

While Mr. Marcinkevicius, the chairman of VP Market, sees little immediate impact of the decision on his company's £¿.5 billion-a-year annual sales -- all the preparation eventually will become useful, he figures -- it does lessen his enthusiasm for the EU.