If things go according to the Slovak euro enthusiasts, the
crown/koruna has less than two years to live -- to be replaced by the
euro on Jan. 1, 2009.
The latest report says that Bratislava is meeting three of the five
requirements: the government debt is about 33%, well under the 60%
limit, and interest rates on long-term bonds are about 4.4%, well
under the ca. 6.2% limit. The exchange-rate requirement is being met,
but must be maintained longer in order to qualify.
On the other hand, the government deficit is about 3.7% as opposed to
the required 3% limit. Bratislava says the higher rate is due to the
current social security/pension plan reforms.
What may be hard to handle is inflation, currently at 4.3%. It is
partly fueled by Slovakia's rapidly growing economy and purchasing
power. Steps to reduce inflation might also interfere with the
growth. The inflation ceiling, currently at 2.9%, is quite harsh --
it is continually recalculated as only 1.5 points above the average
inflation in the 3 euro zone countries (there are 13 of them) with the
Inflation was a reason why Estonia and Lithuania were turned down when
they were planning to join the euro zone. Poland, the Czech R., and
Hungary have put their euro aspirations on hold.
votruba "at" pitt "dot" edu