Brussels, May 7 - The European Commission as expected recommended in its report that Slovakia should be allowed to join the eurozone as of January 1, 2009.

The EC's decision is based on Slovakia's fulfilment of the Maastricht convergence criteria and on the recommendation of the European Central Bank. According to the EC, Slovakia's national legislation, including the statute of the Slovak central bank (NBS), is in accordance with the requirements, and Slovakia is meeting another four conditions concerning inflation, the public-finance deficit, long-term interest rates and the koruna's exchange rate.

"The twelve-month average of harmonised inflation in Slovakia between March 2007-March 2008 was 2.2 percent, significantly below the threshold of 3.2 percent, and it will most probably remain within the criterion limit even in the months to follow, albeit with less room to spare," states the convergence report.

The public-finance deficit has been described by the EC as "trustworthy" and "sustainable" below the threshold of 3 percent of GDP. The deficit fell to 2.2 percent of GDP in 2007, and is expected to stand at 2 percent in 2008 and at 2.3 percent in 2009.

Slovakia joined the Exchange Rate Mechanism ERM-2 in 2005, with the Slovak koruna remaining within the exchange-rate criterion boundaries for the minimum period of two years.

During the past 12 months, long-term interest rates have averaged 4.5 percent, well below the 6.5-percent limit.

At the same time, the EC warns against future risks, however. Slovakia needs to keep inflation under control and maintain its competitiveness. The EC recommends a stricter fiscal policy as a remedy to inflation risks. Slovakia is facing the risk of increasing inflation, as the restraining influence of the strengthening koruna vis-a-vis the euro will gradually dissipate after the final koruna-euro changeover rate is determined. The threat of increased inflation is also due to energy prices, as recent global energy-price increases haven't yet been reflected fully in consumer prices.

According to the ECB, Slovakia has allegedly failed to take proper advantage of its rapid economic growth in recent years in order to achieve fiscal consolidation.

Brussels has also drawn attention to Slovakia's 10-percent unemployment rate - the highest in the EU, with as many as 76 percent of those without jobs being long-term unemployed, unqualified, and thus ill-equipped to find work.

Based on the assessment report of Maastricht-criteria fulfilment, the European Commission recommends that member states accept Slovakia's adoption of the euro on the aforementioned date.

The Convergence Report will be submitted for approval by the Council of Finance Ministers of the EU, set to take place on June 3 in Strasbourg. Slovakia's entry to the eurozone needs to be approved unanimously. If this is the case, it will then require only formal support from EU leaders at their summit in June. The final koruna-euro changeover rate will be set at the EU finance ministers' next session on July 8.

(Slovakia Today, compiled from press reports)

Illustration photo (AFP)