OECD urges Slovaks to keep tight budget in euro

...to avoid an economic "boom and bust".

Slovakia has cut its budget deficit and fought to curb inflation, making itself the frontrunner to follow Slovenia into the euro zone while bigger post-communist economies -- the Czech Republic, Poland and Hungary -- struggle to curb fiscal gaps.

OECD Secretary General Angel Gurria told a conference organised by business daily Hospodarske Noviny that in Portugal, low interest rates after the euro's launch in 1999 sparked a consumer borrowing boom which was not offset by a tight enough fiscal policy.

"Slovakia must be attentive to avoid a similar boom and bust cycle," Gurria said, adding Spain had achieved more sustainable growth by keeping government spending in check.

"The principal lesson that should be drawn from these experiences is the need for fiscal policy to offset a boom in private demand that is likely to result from lower interest rates," he said.

Slovakia should also make its business environment more flexible to maintain productivity growth, Gurria said.