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ECB casts doubt on Slovak euro entry

European Central Bank staff have cast doubt on Slovakia's plan to adopt the euro in 2009, saying the fall in its inflation rate may be short-lived, a memo obtained by Reuters shows. Slovakia's inflation outlook will be key in deciding whether it can join the euro zone, ECB staff said in a memo to the International Monetary Fund.

Having an inflation rate below the reference value - the ceiling for countries wanting to join the euro zone - does not guarantee that the entry criterion has been met, said the memo, which is dated May 30.

Slovak annual inflation fell to a record low of 1.5 percent in May, and the annual average is seen at around that level next spring when the country's application to join the common currency the following year will be assessed. This means inflation would be well below the expected threshold for euro zone entry - defined as 1.5 percentage points above the average of the three lowest inflation rates in the EU - which Slovakia forecast to be around 2.7 percent.

Slovak Central Bank Governor Ivan Šramko said he has not been notified of any official concerns from the ECB.

Compiled by Zuzana Vilikovská from press reports
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