Slovakia today won EU approval to adopt the euro on Jan. 1 2009, thus becoming the 16th member of the European single currency zone. The EU Commission announced today on its Web site that Slovakia had reduced both the fiscal deficit and inflation sufficiently to qualify. At the same time the Commission announced that they were terminating the excess deficit procedure, a move which is a mandatory to joining the euro region.
EU finance ministers must now endorse the commission’s recommendation in July. Not everybody is entirely convinced it seems, and the European Central Bank still has “considerable concerns” about the sustainability of the inflation path, according to a report published by the bank today in Frankfurt. I share many of these concerns – as I have already explained at great length in this post here.
Even in Slovakia itself people retain their own reservations as according to a survey conducted by the Slovak Statistical Office between March 1-7 some 72 percent of respondents had a negative attitude towards the proposed change due to the perception that – in a way which is similar to what happened in countries like Spain and Greece after adoption – prices may well rise faster than anticipated and household budgets become strained.
However I do think that today is really not the time to pursue these concerns, since at this point they would smack more of sour grapes than of anything else. I would really simply like to take this opportunity to congratulate Slovakia on all the hard work they have put in to preparing their membership bid, and wish them every success in the introduction of what now looks like it is soon set to become their new currency.
“To ensure that the adoption of the euro is a success, Slovakia must pursue its efforts to maintain a low-inflation environment, be more ambitious with regard to budgetary consolidation and strengthen its competitiveness position,” EU Monetary Affairs Commissioner Joaquin Almunia
Of course eyes well beyond Slovakia will now be watching the month by month movements in the Slovak CPI, since should the more optimistic expectations on the future inflation path not be fulfilled, then this will only make further applications from other EU10 countries – Bulgaria, Latvia, Lithuania, the Czech Republic, Estonia, Romania, Poland and Hungary – much more difficult in the future.