The European Central Bank (ECB) and the European Commission on Wednesday, May 7, said Slovakia had met the necessary conditions needed to adopt the common European currency, the euro, from Jan. 1, 2009.
In January it will be time for Slovakia
In statements issued in Brussels and Frankfurt, the two European bodies said Slovakia had met all of the necessary economic criteria that were required of it.
"Slovakia has achieved a high degree of sustainable economic convergence and is ready to adopt the euro on 1 January 2009," said EU Commissioner for Economic and Monetary Affairs Joaquin Almunia.
At the same time, Almunia urged Slovakia to "pursue its efforts to maintain a low-inflation environment, be more ambitious with regard to budgetary consolidation and strengthen its competitiveness position. "It must also now speed up its practical preparations to ensure that the changeover takes place smoothly, as it did in Cyprus and Malta in January 2008," the commissioner added.
In its report, the ECB said Slovakia had met the tough fiscal targets for adopting the euro, but also warned Bratislava that it still faced "upside risks to inflation." The ECB said this was the result of surging energy prices and of its tight labor market.
At 2.2 percent of gross domestic product, Slovakia's budget deficit is comfortably within the strict 3-percent rule for euro member states. Likewise, the country's public debt is about half the 60 per cent of GDP that is required under the Maastricht Treaty for joining the euro. Slovakia's 2.2-percent inflation rate is also well below the 3.2-percent reference rate for euro candidate states.
Bratislava must ensure sustainability
But in its report, the ECB also went on to call on Slovakia to take steps to ensure the sustainability of its key fiscal parameters, especially inflation.
"Achieving an environment conducive to sustainable convergence in Slovakia requires, inter alia, the implementation of a sustainable and credible fiscal consolidation path," wrote the ECB.
This included measures to address high structural unemployment, to ensure wage increases are linked to labor productivity as well as pressing on with the liberalization of its economy.
The news was welcomed in Bratislava.
"We are satisfied with the result. This is a very important decision on Slovakia's way to the euro," the country's central banker, Ivan Sramko, told news agency DPA.
Addressing the issues raised by the ECB report, Sramko said the country would be taking its recommendations "very seriously."
Once the decision is ratified by the European Parliament and EU governments, Slovakia will become Europe's second former communist nation to join the euro, after Slovenia.
Others have more to do
In its report Wednesday, the European Commission said none of the other nine EU countries planning to join the euro had met "all of the convergence criteria."
The nine countries are: Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania and Sweden.
In another widely-expected move, the EU executive also proposed closing the excessive deficit procedures that it had brought against Italy, Poland, Portugal and Slovakia.