By Peter Laca
BRATISLAVA, May 5 (Reuters) - Slovakia's invitation to join
the single European currency will cap a decade of rapid economic
development, but the transition is worrying some people in the
former communist country.
"It will be quite difficult for us who have already retired.
I'll get what, 200 euros ($309), how much is that?," said
Gabriela Burcinova, 73, fretting about next January when she
will start getting her monthly pension in euros instead of
Slovak crowns.
"Prices are still going up, energy, gas, food, rent, one has
to pay for it all. I'm not overjoyed," she said in the small
eastern Slovak town of Humenne.
The European Union's executive commission will invite
Slovakia on Wednesday to become the 16th member of the euro zone
from 2009, making it the poorest country to join.
An opinion poll showed last week that nearly three quarters
of Slovaks fear the euro will be bad for them, mainly because
they are worried it will push up prices.
Euro adoption follow reforms which have attracted billions
of euros in foreign investment, made Slovakia the world's
largest car maker per capita and pushed economic growth to 10.4
percent last year -- the highest in the EU.
Once seen as lagging central European neighbours in
introducing market-friendly policies, the country of 5.4 million
people will join the eurozone before Poland, the Czech Republic
and Hungary.
Euro entry will be the biggest international achievement
for leftist Prime Minister Robert Fico, elected in 2006 with
promises to take better care of the poor.
Rapid economic growth, which Fico says is the result of
Slovaks' willingness to work hard for low wages, has boosted
state budget revenues and financed part of his welfare plans.
But he has had to scale down social spending plans to curb
fiscal shortfalls and qualify for euro adoption.
POLITICAL BACKLASH?
Fico is now preparing to devote time and money to make sure
that euro entry does not backfire and undermine his popularity.
"Those most worried about the single currency are elderly
and people with lower education. That is not good news for
ruling coalition parties, as these layers account for a
significant part of their electorates," said Ivan Stulajter, a
columnist at the broadsheet daily Sme.
"It is no coincidence that they are preparing some 'rescue
packages', or, at least, they are talking about them."
The government has approved measures to compensate people
for an eventual euro adoption impact, including unspecified
Christmas bonuses and pension hikes. It also plans to monitor
retailers to prevent abuses during the currency transition.
"If needed, the government will resort to regulating
prices," Fico told a crowd of supporters celebrating Labour Day
in the northern town of Liptovsky Mikulas.
"If needed, the government will make speculative price
increases a crime," he added.
Inflation in Slovakia has already hit a 15-month high of 3.6
percent in March, mainly because of higher costs of food and
oil, factors which are pushing prices up around the globe.
The Slovak crown has been strengthening and making imports
cheaper. The worry is that inflation will jump once this effect
disappears with the crown's demise. This could combine with
potential rounding up of prices in the conversion process.
As the examples of Ireland and Slovenia showed, the common
euro zone monetary policy may not suit the small, open and
fast-growing economy.
"Of course there is some risk that Slovakia might follow
Slovenia's example: After euro adoption (in 2007) the inflation
rate shot up there," said Ulrich Leuchtman, an analyst at
Commerzbank.
"To avoid such a scenario, a strong crown conversion rate
will have to be chosen."
(Additional reporting by Martin Santa; editing by Keith Weir)
