Early euro adoption plans for countries across central and eastern Europe (CEE) have fallen by the wayside, as loose fiscal policies made it difficult to meet the Maastricht criteria for budget balances and inflation. But in 2008, Slovakia bucked the trend and qualified to enter the eurozone in January 2009.

When finance minister Jan Pociatek assumed office in 2006, the budget deficit stood at 3.8% of gross domestic product (GDP). For 2008, it is estimated at less than 2.5%, and in November 2008 Slovakia became the only country all year in the CEE region to receive a sovereign upgrade.

Moreover, eurozone entry is not just a matter of current data – the applicant country has to convince the European Commission (EC) and Central Bank (ECB) that the improvement is sustainable in the future. “It required a lot of heavy groundwork for our teams, we were discussing with the EC and ECB over different numbers and economic models, very small parameters deep within the system,” says Mr Pociatek.

This took place in the distracting context of confrontational party politics and a wafer-thin government majority, which has encouraged the opposition to attempt to undermine Mr Pociatek with a series of no-confidence motions over alleged policy failings. While public support for euro entry was strong, one policy associated with it has proved a source of controversy. This was the brave decision in May 2008 to enact a one-off 16% appreciation of the Slovak koruna before locking the exchange rate to the euro.

The move was designed to combat inflation after eurozone entry, but poses the risk of making the country’s exports less competitive – especially as many CEE currencies have sold off by at least 20% during the global market turbulence in the second half of 2008. However, Mr Pociatek is confident that Slovakia can maintain its competitiveness. “We have an agreement with all social partners that demands for wage increases will not exceed expected productivity growth. In the past two years, the appreciation of the koruna has been accompanied by productivity growth and real exports have grown significantly,” he says.

Even the global economic slowdown does not deter him excessively. He believes it may only delay his 2011 target of a balanced budget by one year.

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