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Cabinet traumatizes crown

SLOVAKIA's central bank (NBS) again had to step into the money market to defend the weakening Slovak crown. It was the third NBS intervention since the June 17 general elections.

On July 12 the crown weakened to 38.75 SKK/EUR, prompting the NBS intervention. It is estimated that NBS used around €1 billion (Sk38.7 billion) to defend the currency. Since the elections, the NBS has spent some Sk89 billion to help support the crown. Although it still has around €12 billion in foreign currency reserves, it is expected that the bank will soon have to make use of another tool to support the crown - an increase in key interest rates.

According to the Hospodárske noviny daily, the devaluation of the crown is the result of uncertainty caused by the steps of the new government, although PM Robert Fico rejects the idea.

Investors are also discouraged by the differing statements made by Fico and his finance minister Ján Počiatek on issues relating to the cabinet's future plans, such as the extra tax on banks.

Compiled by Martina Jurinová from press reports

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