OECD: euro will not affect inflation more than in other countries

The impact of euro introduction on inflation will not be worse in Slovakia than in countries that already use the euro. According to a study that representatives of the Organisation for Economic Cooperation and Development (OECD) presented in Bratislava on July 17, the impact of the changeover on harmonised inflation should not be higher than 0.3 percentage points, the SITA newswire reported. Higher service prices should make up the largest portion of this impact and are likely to have the biggest impact on self-employed individuals and employed citizens. In contrast, the unemployed and pensioners should be affected the least because of their comparatively low use of the services whose prices are expected to grow. The experience of countries that have already introduced the euro shows that prices of recreational and sport services rose the most. The head of the OECD’s economic section, Andrew Dean, says that the prices of these services rose 5.4 percent under the influence of the new currency, while services for households went up 4.8 percent.

The impact of euro introduction on inflation will not be worse in Slovakia than in countries that already use the euro. According to a study that representatives of the Organisation for Economic Cooperation and Development (OECD) presented in Bratislava on July 17, the impact of the changeover on harmonised inflation should not be higher than 0.3 percentage points, the SITA newswire reported. Higher service prices should make up the largest portion of this impact and are likely to have the biggest impact on self-employed individuals and employed citizens. In contrast, the unemployed and pensioners should be affected the least because of their comparatively low use of the services whose prices are expected to grow. The experience of countries that have already introduced the euro shows that prices of recreational and sport services rose the most. The head of the OECD’s economic section, Andrew Dean, says that the prices of these services rose 5.4 percent under the influence of the new currency, while services for households went up 4.8 percent.

Hairdressing ranks high on the chart of sectors with the highest price hikes, together with dry cleaning and tailoring work, restaurants, cafes, and similar facilities, and newspapers and periodicals. These went up 5.1 percent on average. As far as households are concerned, the OECD expects the greatest impact on families with children, while single people and childless families should escape any major negative effects from the euro. The study suggests that the country’s entry into the eurozone will speed up the process of harmonisation of interest rates, mainly for consumer loans and mortgages. This would mean that Slovak interest rates should gradually fall to eurozone levels. The OECD also proposed measures that the Slovak Republic should follow in the forthcoming period if it wants to get the maximum benefit from euro introduction. The most important, in the short term, is the active participation of citizens and responsible organisations in checking euro prices. In the middle and long terms, the OECD says it is most important to create a competitive environment, control wage growth, and pursue a responsible fiscal policy. SITA

Compiled by Zuzana Vilikovská from press reports
The Slovak Spectator cannot vouch for the accuracy of the information presented in its Flash News postings.

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