EU officials urge fiscal discipline in Slovakia after euro adoption

Other News Materials 22 September 2008 21:08 (UTC +04:00)

European officials Monday warned that Slovakia could face a spike in prices after adopting euro in January and urged the ex-communist country to keep reforming its public finances, reported dpa.

"For the euro to remain a success story in Slovakia, the national authorities will need to be very alert and pursue ambitious economic policies on all fronts," said European Central Bank President Jean-Claude Trichet in Bratislava.

He said that Slovakia as "a catching-up economy, is likely to face inflationary pressures that could derail the economy from a sustainable convergence path after euro adoption."

Trichet then encouraged Slovakia to keep tightening its budget gaps, loosen up labour market, reduce structural unemployment and improve business environment.

European Commissioner Joaquin Almunia warned Slovakia that "strong vigilance will be needed to prevent the build-up of inflation risks."

"Slovakia will have to pursue disciplined policies to adapt to the loss of exchange rate flexibility," he said.

They spoke at a conference in Bratislava just three months before Slovakia is to become the 16th country - and the 2nd ex-communist nation after Slovenia - to switch to Europe's common currency.

The Slovak leftist government of Prime Minister Robert Fico promised to keep inflation in check in order to get EU's nod for the move.

In August, Slovakia's annual inflation rate was 4.4 per cent, compared to 3.8 per cent in the eurozone.

Fico's ruling coalition pushed through a law that allows the state to regulate prices if they get out of hand after switching to the euro.