PM Robert Fico is so determined to adopt the euro in 2009 that he has suggested coming to an agreement that would restrict wage growth in Slovakia. The reason is that higher wages would give people more to spend, increasing inflationary pressures in the economy.
To introduce the euro, the government and the central bank must ensure a low inflation rate. For this reason the PM's proposal is not a complete surprise. The problem is that it comes late - if unions and employers agree with it, it would take effect next year, and would have very little impact on inflation at the time it is measured for euro adoption purposes in April 2008.
The second problem is that most large firms sign collective agreements for longer periods than one year. The area in which the 'Stability Pact' could help is thus confined to the state administration. However, various ministries have already promised wage rises to their employees, while pensioners are also awaiting another Christmas bonus.
Finally, Fico did not come forward with a concrete plan, merely a call for labour and business to come to an agreement, despite the fact that only a year remains before Slovakia is measured for its euro-fitness.
The PM changed his pre-election attitude to the euro very quickly and without the necessary analysis. Even so, the government still left the central bank to struggle on without a vice-governor for monetary policy, and did not elect a government appointee for euro adoption until six months had passed.
From now until the time the euro is adopted, each new step by the government should have a clear goal and a clear plan of action. There is not enough time left for anything else.
Pravda,
February 14
19. Feb 2007 at 0:00
