2008-05-07 17:20:10 -
BRATISLAVA, Slovakia (AP) - Slovakia on Wednesday cleared a crucial hurdle toward adopting the euro next year when European Commission and the European Central Bank said the country had met a set of strict economic standards.
Slovakia «is ready to adopt the euro on Jan. 1, 2009,» the EU's top economy official, Joaquin Almunia, said in
Brussels.
The decision was hailed as a big step for a country that went through a difficult transition from decades of communist rule. Slovakia endured several years of isolation under autocratic Prime Minister Vladimir Meciar in the 1990s but then made rapid economic progress with pro-market reforms such as a flat income tax.
Prime Minister Robert Fico, greeted the EU's yes as «a serious historic decision for Slovakia and its people.
«It's a great opportunity,» he told reporters in Bratislava. «We consider the adoption of the euro to be the continuation of the success story that began with the entry into the European Union.
Slovakia is getting in while other new EU members such as Poland, Hungary and the Baltic countries of Latvia, Lithuania and Estonia have seen their timetables slip.
On the streets of the capital Bratislava, 40-year-old businesswoman Alexandra Drobna was enthusiastic, mainly because Slovakia's euro bid puts it ahead of its richer neighbor, the Czech Republic, which it split away from in 1993.
«I'm really glad that we'll have the euro,» she said. «That's a pity for the Czech Republic.
But Magdalena Sucha, a 76-year-old retiree from the capital, feared the changeover would give retailers the opportunity to hike prices _ something the government says it will try to prevent.
«What should I be looking forward to?» she said. «Prices will go up as happened in Austria and common people will have to pay.
The European Commission said it now will ask EU finance ministers and EU leaders to approve Slovakia's membership bid in June and July. They will fix the exchange rate for when Slovakia swaps the koruna for the euro to become the 16th member of the euro currency zone.
Almunia also urged other euro candidates to step up their efforts to join the euro as «this is clearly in their long-term interest.
But Slovakia will likely be the last of a group of EU newcomers to take on the currency this decade as other eastern European nations cool their euro plans rather than strain to shape up their public finances _ and give away control over their currencies.
The European Central Bank, however, warned Slovakia of «considerable concerns» that inflation may rise more than the euro average in the future.
The soaring value of the koruna against the euro has dampened inflation in the past by making imports cheaper, but these and other factors will vanish _ risking higher labor costs as global prices for food and energy go up this year.
The bank called on the country to push on with reforms to open up its economy and the job market as well as boosting competition for products, particularly for energy, that could help bring down Slovakia's jobless rate, the highest in the 27-nation European Union.
Slovakian officials insisted inflation was under control _ acknowledging that it will be difficult to keep up a fast pace of growth and limit price increases.
«It is extremely difficult to maintain high economic growth and a low inflation rate at the same time,» Fico said. «We succeeded in doing it.
But he slammed the tight euro membership criteria as «unjust for the new EU countries.
High inflation derailed Lithuania's euro bid in 2006 and has deterred Estonia, Latvia, Lithuania and Bulgaria from joining in the near future as braking price increases risks limiting the economy's growth.
Higher prices may be the cost of euro membership in any case as the country catches up economically with the euro zone. Prices are currently two-thirds the euro average and low wages have made it an attractive location for major manufacturers.
The EU's executive Commission said average yearly inflation in Slovakia in March was 2.2 percent _ well below an EU limit of 3.2 percent for joining the zone.
Slovakia also passed tests for its yearly budget deficit _ the difference between what a government spends and receives every year _ which stood at 2.2 percent of gross domestic product in 2007. The EU executive asked Slovakia to do more to reduce this in future.
EU finance ministers must first formally clear Slovakia of breaking EU budget rules in 2006 because it ran a deficit above an EU maximum ceiling of 3 percent. Overall government debt was 29.4 percent of GDP, well under a 60 percent limit.
The country of 5 million people will be the largest to join the euro area since cash was introduced in 2002. So far, only three of the smallest countries to enter the EU in 2004 _ Slovenia, Cyprus and Malta _ have adopted the euro.
Associated Press Writer Aoife White contributed from Brussels.
