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  3. The growing economy has required changing one of the criteria for the adoption of the Euro

The growing economy has required changing one of the criteria for the adoption of the Euro

Last update: 11.05.2007 06:00

Slovakia has a new official exchange rate of the crown against the euro, from which the crown can vary up to 15 per cent in either direction. At Slovakia’s request, with the agreement of the finance ministries of the Euro-Zone countries, the president of the European Central Bank, and the finance ministries and governors of the central banks of Cyprus, Denmark, Estonia, Lithuania, Latvia, Malta, and Slovakia, the central parity of the Slovak crown in ERM II was revalued with effect from 19th March 2007.

The new central parity of the crown against the euro was set at SKK 35.4424 per euro. This makes its new lower and upper limits for compulsory intervention SKK 30.1260 and SKK 40.7588 per euro, respectively.

Slovakia’s economy has undergone significant structural modifications since it joined the European Exchange Rate Mechanism (ERM) II in November 2005. Sound macroeconomic policies and the considerable inflow of foreign direct investments over the past years have caused economic growth to be gradually increasing. A high productivity growth differential against the Euro-Zone has led to the significant strengthening of the actual equilibrium exchange rate. At a relatively low inflation rate, this has also been reflected in the level of the nominal rate. The revaluation of the parity is, therefore, fully substantiated by a balanced shift of the economic fundamentals.

 In addition, Slovakia has confirmed its commitment to continue with sound and responsible macroeconomic policies. Well-adjusted policies along with further structural changes are not essential only for maintaining the new central parity but also for the fast and sustainable growth of living standards in Slovakia.

According to Finance Minister Ján Počiatek, the parity revaluation is a proof of the new cabinet’s commitment to continue the existing trends. ”Within this process, the current cabinet is committed to continue with a responsible fiscal policy, and fully endorses the revised Stability and Growth Pact to foster the growth of Slovakia’s economy and strengthen the stability of the Slovak currency in this way", he said.

The revaluation of the central parity within the ERM II mechanism, where it is required to remain (as one of the prerequisites) in order to adopt the euro, is a logical consequence of the improvement of the condition of the Slovak economy over the past months, according to Igor Barát, the governmental official in charge of euro adoption. "It also means that the chances of meeting the criteria for euro adoption are more feasible", said Barát.