 |
|
|
|
|
|
 |
|
|
|
| IMF: Slovak euro bid to signal CEE treatment |
| Wienna, 21.10.2007 |
|
| VIENNA (Reuters) - The fate of Slovakia's euro bid will signal to the other euro zone hopefuls what treatment they can expect when applying to join the single currency area, a senior International Monetary Official said on Wednesday.
Slovakia hopes to enter the euro zone in 2009 as the first of four central European EU states, and it would be the first post-communist nation with a flexible foreign exchange regime to swap its currency for the euro.
Slovakia expects to meet all nominal criteria for euro zone entry when it is assessed in the spring of 2008.
However, it will also be judged as to whether its convergence is based on sustainable grounds, and the vague definition of the sustainability condition has sparked criticism from the central European governments and central banks.
Christoph Rosenberg, the IMF's senior regional representative for Central Europe and the Balkans, told the Reuters Central European Investment Summit he saw Slovakia meeting the Maastricht criteria for euro zone entry.
But, he added, the question still remained as to how "the sustainability issues are looked at".
"We should also not forget that this fundamentally, in the end, is a political decision," Rosenberg said. "This will send a signal, and whoever makes the decision, will have to be cognizant of that."
Governments, central banks and investors in the region are closely following Slovakia's path to the euro, and many say a negative verdict next spring could sour the mood in eastern Europe and delay other euro applications.
Rosenberg said rejecting Slovakia if it met all nominal conditions could be seen as applying other criteria that are not formally set, such as the level of GDP per capita.
"It would have large repercussions, not only for Slovakia, but it would send a signal to other countries that, in the end, it's the real convergence that's the true test, which is not one that's written in Maastricht criteria," he sad.
Wed Oct 17, 2007 8:00am EDT
By Peter Laca
VIENNA (Reuters) - Slovak EU-norm inflation has picked up more than expected due to food price growth, but there is no big need to tighten monetary conditions, central bank (NBS) board member Ludovit Odor said on Tuesday.
Speaking at the Reuters Central European Investment Summit, Odor said he believed Slovakia was on track to meet the inflation condition for euro adoption, which the ex-communist European Union member targets for the beginning of 2009.
"(Monetary conditions) are in a tighter zone, so basically we are a little bit tightening policy conditions mainly because of the exchange rate channel," Odor said.
"I would say that at this moment I do not see some huge need to tighten very much the monetary policy conditions because I think that they are close to some optimal level at this stage."
Slovak EU-norm inflation jumped to 1.7 percent on an annual basis in September, from a historical minimum of 1.2 percent booked in both August and July, above market expectation of a 1.6 percent rise.
"This is not a big surprise, that food prices were behind the rise. But the magnitude (of the rise) was a little bit of a surprise for the central bank," Odor said.
"It seems to us that this trend could continue in the coming months ... This could be translated into the new forecasts of the NBS which will be released very soon. We expect to revise our forecast at least for the next two years."
Odor said a good way for Slovak monetary policy would be to leave the key two-week repo rate at the current level of 4.25 percent and let the euro zone rates, now at 4.0 percent, converge ahead of euro entry.
However, the outlook for euro zone rates has softened due to the global credit crunch and many analysts expect the ECB to leave rates flat for the time being.
EURO ON TRACK
Slovakia is likely to see higher inflation in the future but Odor said it was natural phenomenon for a converging economy and should not disqualify Slovakia from the euro zone entry.
"Of course, if you expect catching up in real terms, you also have to expect catching up in nominal terms. So we will have higher inflation than the euro zone, but this inflation will not be very high compared with the euro zone average."
The rise in the cost of food should not negatively affect next year's assessment of whether Slovakia meets the price growth condition for euro zone entry sustainably, as a similar trend was seen in other countries because of the whether conditions.
Slovakia has experienced accelerating economic growth in the past few years and the 2007 gross domestic product rise is expected to surpass last year's record growth of 8.3 percent.
Odor said there were no dangerous inflationary pressures in the fast-growing economy that would require central bank action.
"There are no signs of overheating pressures, the current account is okay, productivity growth is higher than the real wage growth," Odor said, but added that pressures from the tightening labor market could build up in two or three years.
"We have to deal with these pressures, but it is not an immediate threat to our economy or an immediate threat to fulfilling the Maastricht criteria."
www,reuters.com |
|
|
|
|
|
|
|
|
|
|
|
|
Address : Euro-Brew Ltd., Hlboká 22, 917 01 Trnava, Slovakia
Tel. : +421 33 53 418 53, Fax : +421 33 53 418 52, E-mail : info@eurobrew.sk |
|
|
