Slovakia hails eurozone approval, rejects inflation criticism
BRATISLAVA (AFP) — Prime Minister Robert Fico hailed EU approval of Slovakia's euro entry as a historic decision for his country on Wednesday while rejecting criticisms of its efforts to curb inflation.
"It is a significant historical decision for Slovakia and its people," Fico told a news conference after the European Commission and the European Central Bank (ECB) cleared the way for the former communist country to become the eurozone's 16th member on January 1, 2009.
The changeover, which has to be formally cleared by leaders of the 27-nation EU in June, coincides with the 16th anniversary of Slovakia's modern founding out of Czechoslovakia.
Slovakia will be the first country in former communist Central Europe to adopt the euro and the second, following Slovenia, in the former Yugoslavia, to join the club of mostly rich Western countries.
Fico downplayed any expectations of major celebrations, however, noting that the long-sought decision also brought with it many challenges.
"We have no celebrations. There are no fireworks and no champagne because we understand this as a very demanding decision," Fico said, flanked by Finance Minister Jan Pociatek and Slovak National Bank governor Ivan Sramko.
At the same time, he hit back at ECB remarks that it still had "considerable concerns regarding the sustainability of inflation convergence in Slovakia."
Fico stressed that Slovakia had met the inflation criteria for euro adoption with room to spare.
"We were 1.0 percentage point lower than the inflation criteria," he said, adding that inflation was a worldwide problem but Bratislava would take the necessary steps to curb price rises.
Fico, whose left-dominated coalition government has made euro adoption a flagship policy in spite of the restraints it has put on government spending and social policies, also attacked the qualification criteria.
"I personally judge these criteria as unfair," Fico protested. "These create problems when you have high growth and have to keep inflation under control."
The neighbouring governments of the Czech Republic and Poland, who were long seen as euro adoption frontrunners, have got cold feet about fast entry while Hungary is battling a ballooning budget deficit which has overshadowed its chances.
Slovak authorities expect a euro adoption pay-off in the form of a further boost to the booming economy, which grew 10.4 percent last year.
The switch to the single European currency could add 0.7 percentage points to growth by fuelling trade with eurozone countries, attracting more foreign investment and keeping the cost of borrowing low, according to a study by the Slovak National Bank.
At the same time Slovak living standards, at just over half the EU average, should catch up quicker than by sticking with the koruna, it said.
Slovaks' real incomes should climb by an extra 4.6 percent a year in the decade following the switch, the bank said in a separate report.
But along with an advance in living standards, prices will also rise.
"With strong economic growth, Slovakia will be catching up with the EU not only in living standards but inevitably also in price levels," the bank warned.
Fears that the euro will spark further price rises are one of the main popular concerns, with 56 percent of respondents in a survey last week saying they considered the currency change disadvantageous.
