22nd Oct 2020

Slovakia confirmed as ready for euro

  • Slovakia would join the euro as the EU celebrates the 10th anniversary of the introduction of the single currency (Photo: European Community)

Slovakia has received formal confirmation that it is ready to join the euro on 1 January 2009, despite the "considerable concerns" of the European Central Bank about the forthcoming price stability performance of the country.

"The report finds that Slovakia has achieved a 'high degree of sustainable convergence' and therefore it is considered ready to adopt the euro in 2009," said the European Commission evaluation report.

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It stated that "the budget deficit in Slovakia has seen a credible and sustainable reduction to below 3 percent of GDP," and its average inflation rate "is well below the reference value, and it is likely to remain below the reference value in the months ahead, albeit with a narrowing margin."

The levels of inflation in Slovakia were previously regarded as the most sensitive area of the Slovak candidacy, with Brussels urging Bratislava until the last minute to make more lasting cuts in the budgetary deficit to prevent future inflation hikes.

EU economy commissioner Joaquin Almunia repeated the message even after he had formally confirmed the green light to the 5.5-million strong country.

"We are aware of the inflation risks and I hope that also the Slovak authorities are aware of the necessity to put the inflation under control in the next year, once the exchange rate will be finally established."

In a separate analysis, the European Central Bank (ECB) used even harsher rhetoric, stressing that "there are considerable concerns regarding the sustainability of inflation convergence" in Slovakia.

It noted that the forecasts by various international organisations put the future inflation rates in the country range from 3.2 percent to 3.8 percent for 2008 and from 2.8 percent to 3.8 percent for 2009.

"In view of current developments in global energy and food markets, and given ongoing strong growth in domestic demand, as well as the tightening of labour market conditions, the balance of risks to these forecasts for Slovakia is on the upside," the ECB suggested.

An earlier and even more critical version of the ECB's statement on Slovakia sparked criticism by central bank governors from several countries, namely Lithuania, according to Slovak media.

Despite the warnings however, both the EU-executive and Frankfurt-based central bank have stated that Bratislava is ready for the euro and their positive recommendation is to be discussed on 3 June by EU finance ministers.

If they agree with the assessment, the 2009 euro entry for Slovakia should be rubber-stamped by the bloc's leaders at a 19-20 June summit, with the conversion rate set to be adopted on 8 July.

Under such a scenario, Slovakia would join the eurozone as the bloc celebrates the 10th anniversary of the introduction of the single currency in 11 states in 1999, as its 16th member state.

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