Summary
[...] the loss of exchange rate flexibility comes at a time of deteriorating global economic conditions, and the high conversion rate may intensify the impact on the real economy. * The choice of conversion rate was driven principally by the view common to both the government and the European Commission that fighting inflationary pressures would be a priority after euro membership begins. * But Slovakia's impressive performance has been founded on competitive labour costs and economic reform. [...] public finances have been consolidated and inflation brought down to Eurozone levels. ...but challenging times ahead... * While membership of the Eurozone is a strong positive that will help reinforce confidence in the economy over the medium term, underpinning further inflows of FDI, the decision comes at a time when a number of challenges are emerging. * Slovakia comfortably passed the euro test for inflation (not more than 1.5% points higher than the average of the EU's three lowest rated countries in the year to March 2008).
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Extract
Slovakia
Highlights and Key Issues
* With the key policy rate at the same level as the Eurozone and the SKK stable at very close to the agreed final conversion rate, Slovakia is on track for a smooth adoption of the euro on 1 January 2009.* Membership of the Eurozone is a strong positive that will reinforce confidence in the economy over the medium term and underpin further inflows of FDI. But the loss of exchange rate flexibility comes at a time of deteriorating global economic conditions, and the high conversion rate may intensify ...See the full content of this document