Global Economics

Slovenia Joins the Eurozone


The former Yugoslav country has become the 13th EU member state to adopt the euro, with circulation of the currency beginning without a transitional period

Slovenia has become the 13th EU member state to introduce the euro, ditching its national currency on 1 January as the first of the 2004 bloc's newcomers.

Slovenia is the euro front-runner of the new member states - all legally obliged to adopt the single currency under their accession treaties to the EU, with its citizens hugely in favour of the move all throughout the preparations.

The ex-Yugoslav country will have dual circulation for the first two weeks during which time all Slovenian banks will change tolars into euros free of charge and the national central bank will be in charge of it later on.

As a result of the so-called "big bang" cash changeover Ljubljana has chosen, euro coins and notes have started circulating straight away without a transitional period, with retailers obliged to give change in euro from 1 January onward.

The central bank has been supplying banks and companies with euro cash since September, in a bid to prevent any practical problems with the switch. Slovenians could also pick up brand new euro coins with their national designs.

MEDITERRANEAN ISLANDS TO FOLLOW

After Slovenia, Cyprus and Malta aim to follow suit next January but their euro entry plans need to be approved by the European Commission and the Frankfurt-based European Central Bank on the basis of the economic criteria laid down as pre-conditions for joining the eurozone.

These include budget debt, deficit and inflation within the agreed ceilings and also concern exchange rate stability, long term interest rates and legal provisions, particularly regarding the national central bank.

The commission's latest report suggested that both Nicosia and Valetta are well on track in their effort to join in 2008, with Malta in need of a little more effort on state spending and inflation.

Inflation worries

Ljubljana was originally supposed to be accompanied by Tallinn and Vilnius in celebrating the euro adoption.

But the two Baltic states had to back down from their 2007 entry requests due to higher than allowed inflation rates - with Estonia doing so voluntarily and Lithuania's bid being rejected by Brussels last May despite missing the then EU target by a whisker.

In Slovenia, the run-up to €-day was marked by fears of speculative price hikes, with the European Commission warning the country's authorities to learn from old Europe's mistakes by introducing ways to name and shame retailers who abuse the currency changeover.

Slovenian businessmen and officials insisted similar practices were not going to happen but some price hikes - particularly in the area of services, such as post services by 164% or parking tolls by up to 100 percent - were registered in early December.

STRAIGHTFORWARD ROUTE

Slovenia has been regarded as a political and economic success story within the group of ten newcomers.

It was among the first candidate countries to open accession negotiations in 1998 and proceeded without major problems until the 2004 enlargement.

In 2008, it will also be the first new member state to hold the EU six-month rotating presidency, followed by the Czech Republic in 2009.

According to analysts, the single European currency will be beneficial for the small country as the move to cut out exchange-rate variations against the euro should help to boost its trade.

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