Slowakije koppelt valuta aan euro (en)

EUOBSERVER/BRATISLAVA - Slovakia has taken a major step toward adopting the euro by entering the European Exchange Rate Mechanism (ERM-II), the `waiting room' for joining the common currency.

The decision, in line with Slovakia's aim to introduce the euro in 2009, was made on Friday evening (26 November), but not announced until after the close of markets in Europe and North America.

Under ERM-II, the Slovak koruna is allowed to fluctuate in a band of plus or minus 15 percent on either side of the central exchange rate, which was set at €1 to koruna 38.4550.

Each country must remain in the system for at least two years before switching to the euro.

In secrecy

The entry of Slovakia to ERM-II came as something of a surprise, since the move had been scheduled for June 2006.

"Due to an earlier-than-expected entry, Slovakia gains more time to prepare for introduction of the single European currency", Slovak Finance Minister Ivan Miklos said, adding the country "sticks to its plan to join the currency block in January 2009."

According to Slovakia's Central Bank, the move will be a good signal to foreign investors and markets, as well as Slovak businesses trading in the region.

"The Slovak koruna is no longer to be influenced by the neighbouring currencies", central bank governor Ivan Sramko said in a joint statetment with the finance ministry.

Out of the ten new EU members, only the Czech Republic, Poland and Hungary have yet to join ERM-II.

Main challenge to bring budget deficit under control

However, the move is likely to tie the hands of the next Slovak government, as it requires a high degree of budgetary discipline.

"It is irresponsible to enter ERM-II before next year's parliamentary election", said the vice-governor of the European Bank for Reconstruction and Development Brigita Schmognerova, who is of Slovak origin.

Slovakia hopes to end this year with a budget deficit of 3.34 percent of GDP, compared to an upper limit for eurozone membership of 3 percent.

Who lags behind

Prior to Slovakia's entry, six new member states were already inside ERM-II.

Estonia, Slovenia and Lithuania joined in June 2004, followed by Latvia, Malta and Cyprus last April. They are planning to enter the eurozone between 2007 and 2008.

The Czech Republic and Hungary have put back the euro adoption deadline to 2010, while Poland has yet to set a target date.

In accordance with the provisions of the Maastricht Treaty, all new EU members are obliged to switch to the common currency.