Global Economics

Slovakia Gets the Go to Join the Euro


In 2009, it will become the 16th country to join the monetary union, and the first in central Europe

Slovakia is the first central European country to have successfully finalised the evaluation procedures for joining the euro area in 2009. It will become its 16th member just as the monetary union celebrates ten years of existence.

EU finance ministers gave final approval to Slovakia's euro membership bid on Tuesday (8 July), setting a conversion rate for its 5.4 million citizens at 30.126 Slovak koruna to one euro.

Welcoming the decision, French finance minister Christine Lagarde, who chaired the ministerial session, highlighted that it is the "first time that an old Iron Curtain country has joined the euro."

EU economy commissioner Joaquin Almunia said that the green light for Slovakia is proof that the common currency club is not closed to new members and all candidates that in future meet the entry criteria will be free to join.

As a significantly poorer country having transformed itself from a centrally-planned economy to a market economy, Slovakia's accession to the EU's monetary union has been watched closely as a test case for other states in the region hoping to join, such as Poland.

Some Brussels-based diplomats and officials described Bratislava's path to the euro as quite "bumpy" amid Slovak celebrations on Tuesday.

During the evaluation process, the long-term prospect of the country's price stability caused the biggest doubts over its readiness to join the club, but despite recording the highest economic growth rates across the EU, Slovakia managed to keep inflation below the required threshold.

At a later stage, a significant appreciation of Slovak koruna also sparked some question marks as its central parity to euro - agreed when Slovakia joined the so called exchange rate mechanism (ERMII) in 2005 - changed twice in favour of Slovaks, meaning the koruna appreciated by 24 percent during its time in the currency basket.

Commenting on the final verdict on the exchange rate, Slovak finance minister Jan Pociatek said: "It is a success for people and at the same time, it will not hurt the business sector."

He confirmed that the social democratic government of Robert Fico had tried to get a "rounded" conversion rate of 30 koruna to one euro but the EU institutions wanted to prevent a precedent of setting stronger euro entry exchange rates than previously agreed central parity.

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