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Europe

Excitement and Hope as Slovenia Adopts the Euro

Slovenia on New Year's Day will become the first former communist state to adopt the European Union's common currency as it exchanges its tolar for the euro.

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Slovenia leads the way in eastern Europe in embracing the euro

The Slovenian National Bank has already distributed 450,000 euro starter packets with exactly 12.52 euros in each. Hotlines are busy, with staff answering questions about the new currency. Common ones ask how long the tolar can be used and how long can it be exchanged for the euro.

Still, most Slovenians are pretty relaxed about the change, said Nada Serajnik-Sraka, who heads the Euro Information Campaign for the government.

"More than 80 percent are already familiar with the Euro," she said. "Slovenians travel a lot and are good business people so they usually already have euros in their wallets."

A success story

Five years after euro was introduced into the EU, three years after Slovenia acceded to the EU and 15 years after Slovenia declared independence from the former Yugoslavia, Slovenia's adoption of the euro marks a new stage in the east-west integration of Europe.

"The euro isn't important only for our economy, we also expect psychological benefits ... we are coming closer to the most developed part of the EU and this will give (citizens) confidence," Slovenian Prime Minister Janez Jansa told the AFP news agency.

Den Tisch gedeckt für die EU

Inflation is expected to rise because of the change

The tolar, which Jansa described as a "success story," was introduced in 1991 to cut off economic ties to the former Yugoslavia.

The accession to the eurozone is also a coup for Slovenia as it is the only one of the 10 countries -- eight former Communist states plus Malta and Cyprus -- that joined in 2004 to have met the tough Maastricht criteria on public finances, inflation, interest and exchange rates that are required for euro-zone newcomers.

Smooth transition

After EU finance ministers gave Slovenia the green light last July to join the euro zone, the government and central bank had to carry out extensive preparations for the switch such as minting Slovenian euro coins, distributing bills to banks and preparing the infrastructure for the changeover.

The changeover to the single European currency foresees that tolars and euros will circulate simultaneously for only the first two weeks of January. After that, banks and post offices will continue changing tolars into euros until the end of February. From March on, only the central bank will continue changing tolars for euros. The exchange rate will be one euro for 239.64 tolars.

Some say that transition won't be difficult because of Slovenia's readiness for the change and because of its history.

"We have already had so many currencies here in Slovenia," said Anja, a political science student who staffs the hotlines. "I am only 23 and have already been through four currencies so imagine how my grandmother feels. And many people calculate still in the dinar, the old Yugoslavian currency, or in German marks. Often, people have had their savings in marks therefore the calculate in marks."

One concern is inflation

To prevent a rounding upward of prices as happened when other nations changed over to the euro, the government introduced last March the double labelling of prices, in euros and tolars, which will remain in force for six months.

Despite this measure, Slovenia's main consumer association has warned that some prices have increased excessively already and it has opened a Web site to shame stores accused of profiteering.

Karte Slowenien - EU-Erweiterungsland

Slovenia is small in size, but big in economic performance

Jansa said he did not think the hikes will push up inflation, which in November stood at 2.3 percent on a 12-month basis.

"We did face some rising prices but it was not significant," he said. "Last October we had a deflation of almost one percent (0.8 percent) which was the biggest fall in Slovenia's history."

Others following

Now the wealthiest of eight former communist states that joined the European Union in 2004, Slovenia will mark another historic step in January 2008 when it becomes the first of the EU newcomers to take over the six-month EU presidency.

The country will preside over the drive by other new EU states to join the euro. Cyprus and Malta are expected to follow Slovenia into the euro zone in 2008 and Slovakia is aiming to adopt the single currency in 2009. The Czech Republic is now aiming for 2012 and Hungary 2013.

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