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Odds are good for euro adoption, analysts say

THE CHANCES of Slovakia adopting the euro in January 2009 went up in December, reaching their highest level since the middle of last year.

THE CHANCES of Slovakia adopting the euro in January 2009 went up in December, reaching their highest level since the middle of last year.

According to the economists and analysts polled in the regular survey from the INEKO non-governmental think-tank and the Club of Economic Analysts (KEA), Slovakia has a 78-percent chance of making it into the eurozone on schedule, the SITA newswire wrote. That ties the country’s best odds so far, which it reached in July 2007.

The main factor behind the increase was Slovakia’s improved prospects for meeting the budget criteria for euro adoption. The probability of that increased from 85 percent to 90 percent after the positive results of last year’s general government budget performance were announced.

“Improved economic results from the general government budget increase the buffer zone (under the Maastricht criteria requirements),” UniCredit Bank analyst Viliam Pätoprstý told SITA. „The rest of the public sector components of the budget are practically the only unknown, but these should not be a negative surprise, either.“

Slovakia’s chances of meeting the other Maastricht criteria did not change significantly in December. The experts see the country’s odds of meeting the Maastricht inflation criterion at 80 percent, which is one percentage point less than in November.

“Slovakia, despite higher prices in recent months, has been meeting the inflation criterion, and I expect that it will continue to meet it with more than a half-percent to spare in March 2008,” said Poštová Banka analyst Eva Sárazová. „It is not just the low-inflation summer months that will likely contribute to the technical fulfillment of the criterion, but also a higher inflation benchmark, because inflation has been growing across the European Union.“

Slovakia is most likely to meet the exchange rate stability target, economists say – it has a 93-percent chance here, the same level it had in November.

“The exchange rate of the Slovak crown has been developing in accordance with the exchange rate criterion and mirrors the country’s very positive economic growth, as well as its rational fiscal policy,” said VÚB Banka’s Elena Kohútiková. „I do not expect any major problems when the exchange rate stability criterion is evaluated, as the exchange rate has been stable with only occasional interventions from the central bank.“

A total of 23 economic analysts participated in the December survey, and 19 of them believed that Slovakia would adopt the euro according to schedule.

Eighteen analysts also gave their estimates of the conversion rate at which the crown will be exchanged for the euro. Their average estimate was 32.64 SKK/EUR, and individual estimates ranged from 31.50 SKK/EUR to 33.25 SKK/EUR.

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