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Slovaks embrace new economic cushion

Slovaks set aside fears over their slowing economy for a few hours on New Year’s eve as midnight fireworks and an all-night rock concert in Bratislava heralded the adoption of the euro.

In Slovakia, the euro is seen as one of the most significant events since independence, and a confirmation of the country’s status as a mainstream European nation. As Slovakia bid farewell to the koruna – becoming the 16th country to adopt the single European currency – their neighbours and former compatriots in the Czech Republic were taking over the six-month European presidency.

But while the Czechs display no urgency to join the euro, Slovakia’s change of currency has provided a cushion against the turmoil of the global economic crisis. Earlier this year, the Czech koruna soared against the euro and the dollar, putting a squeeze on exporters. But since then, the currency has declined by 15 per cent against the euro and by 30 per cent against the dollar, as investors have fled emerging markets.

Meanwhile, the Slovak koruna has been fixed at 30.1260 against the euro since July. “Euro adoption is definitely a positive step,” said Ladislav Juza, from the Prague office of the consultancy PwC. “It will allow companies to stop focusing on the currency fluctuation only.

The Czech Republic and Poland might gain a competitive advantage in the short term, provided local currencies decrease in strength, but, in the long term, euro adoption will bring much more positive effects.” The move has helped to bolster the economy.

Slovakia’s central bank estimates that gross domestic product growth this year will come in at 4.7 per cent, compared with an expected 7.5 per cent for 2008, with the caveat that the risks are mostly on the downside. By contrast, the Czech economy is expected to grow at only 2.9 per cent in 2009.

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