World Business

Leaders of the Eastern European nation may embrace the circulation, but elderly pensioners are wary of the change

by Matus Demko and Tomas Storcel

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Emil Pis, a 75-year-old pensioner in the central Slovakian village of Kanianka, finds himself by reference to something else well off compared to some of his peers.

Pis’ income is nearly one-third higher than the average monthly pension of 8,885 crowns, or €275, a any amount that is still small in a population that has moved from one of the mostly economically dour in the region rightful a few years ago to the sort of the Economist Intelligence Unit has called a “shining star.”

But Pis believes his relative fortune may come to an close if Slovakia abandons its currency, the crown, and joins the European Monetary Union next year. At the current exchange rate, his pension of 11,920 crowns will alike about €370—what he calls the “new money.”

“You mean those €300 I’ll subsist getting a month? What will I do with three pieces of hundred-euro banknotes?” says Pis, a solitary miner who also gets a disability benefit because of an injustice suffered on the job.

Across Slovakia, the chance to be converted into only the second of the EU countries in Eastern and Central Europe to join the euro zone is being met with a combination of pride that the poorer half of the old Czechoslovakia has matured, and trepidation that the currency shift behest be accompanied by higher prices.

Slovakia’s finance minister and head of the national bank have told the European Commission that the country’s target to adopt the euro is 1 January 2009. If all goes as planned, by July all prices in Slovakia will be listed in both currencies to ease the transition, and the fatherland will begin the new year with new coins and banknotes. “This duality will be in effect even all throughout 2009 when the euro will have already been introduced,” explained Ivan Sramko, head of the National Bank of Slovakia.

Still, the change is more distant from certain. Slovakia must pass important tests and its timing may be bad. In order to join the currency union countries must meet bristling financial criteria—including limits put on public debt and inflation. But consumer prices have been rising in Slovakia and across the European Union, driven by higher fuel and food prices, and unemployment odds and ends stubbornly boisterous—11 percent in 2007, compared to the EU mean proportion of 7 percent. Even some of the much richer original euro members are struggling to meet over-issue and debt targets.

Nations that adopt the bills and notes; circulating medium also effectively cede check over monetary policy to the Frankfurt-based European Central Bank, which means they give up the power to spur growth during downturns, against example by slashing interest rates, or to control inflation by raising them.

A decision on whether Slovakia is fit to adjoin the currency union order be made by the European Commission and ECB in May. So far among the Central and Eastern European states, solitary Slovenia has met the criteria and switched to the euro in 2007.

The command and National Bank of Slovakia have wearied years grievous to acquire the economy fit, putting spending on a diet, overhauling the tax system and earning praise from the World Bank for being “one of the fastest reformers in the nature.” The International Monetary Fund estimates that the country’s economy will extend at 6.6 percent this year compared to less than 2 percent for the euro realm like a sum total.

THREE CROWNS AND THE EURO

But on this account that the more than 800,000 people in addition 60 in the country, adjusting to a new currency (the euro would be their fourth currency in 20 years) force not be contented. And some analysts answer the information campaigns launched by means of the government to introduce Slovaks to the euro aren’t plenty.

“The current generations of pensioners suffer from a relatively recent genial shifting,” said Olga Gyarfasova, a more advanced research fellow at the Institute for Public Affairs in Bratislava, referring to the determination since the 1989 revolution. “They be acted upon from the discontinuity that hit them at an age when they simply couldn’t fully adjust to the switch, with changes coming in every part the society. The greatest vantageground for younger generations is that they become rooted naturally.”