(Repeats story published on Saturday)
By Marcin Grajewski and Jan Strupczewski
BRDO, Slovenia, April 5 (Reuters) - Slovakia applied on Saturday for a
European Commission assessment of its readiness to adopt the euro next year,
vowing to take new measures to curb inflation, if need be, to get the green
light for euro entry.
In an exclusive interview with Reuters, Slovak Finance Minister Jan Pociatek
repeated the small former communist state would not even rule out another
revaluation of its crown unit.
"I am an optimist about our euro zone entry," Pociatek said after handing in
the assessment request to the European Union executive arm and the European
Central Bank at a meeting of EU finance minister and central bankers in
Slovenia.
"I estimate... that the statistical probability that we will enter the euro
zone still stands at 90 percent," he said.
The application starts a formal process that is likely to make the central
European state the 16th member of the single currency area from 2009 if the
Commission invites it in May, EU leaders agree in June and EU finance ministers
concur in July.
Asked by reporters on Saturday what message Bratislava received on its bid
to join the euro zone, Slovak central bank governor Ivan Sramko said: "We still
have a positive signal."
To qualify, Slovakia has to have its debt and budget deficit within EU
limits, a stable currency, low interest rates and, most importantly, sustainably
low inflation -- a task made difficult by soaring oil and food prices.
"Our analysis and the analysis of our central bank implies that inflation
should be within the required limit," Pociatek said. "We believe our inflation
will not reach the level outside the limit," he said.
Average annual inflation in Slovakia in the 12 months to February was 2.1
percent, well below the ceiling of 3.1 percent, which is calculated as 1.5
percentage points above the average of three EU countries with the lowest rate
of price growth.
March data that will be used in the Commission and ECB assessments is
unlikely to change this substantially.
INFLATION TRENDS SCRUTINISED
But future inflation trends are less easy to predict and the Commission is
keen to avoid a forecasting embarrassment after it deemed in 2006 Slovenia's
inflation was sustainably low to join the euro, only to see Slovenian price
growth take off in 2007 to a record in the euro zone, EU sources said.
To keep price growth in check Slovakia has to struggle against fast rising
food and oil prices, which are boosting consumer price indices all over Europe
and these pressures are unlikely to fade soon.
The Commission will therefore scrutinise future Slovak inflation trends with
extra care, sources said.
Pociatek told Reuters, however, that Slovakia was ready to take even further
measures to make sure inflation stays under control and the Commission gives it
the green light.
"We are ready to take additional measures. We have proposed... a more
ambitious fiscal consolidation plan, which is supposed to be adopted next week,"
Pociatek said.
"We will closely monitor the situation throughout the year before the 2009
budget adopted in late November or early December and we will still be able to
react," he said.
"We propose that we will go down with the deficit to 1.7 percent of GDP in
2009, 0.8 in 2010 and to a balanced budget in 2011," he added.
Slovakia's budget deficit in 2007 was 2.2 percent and is seen at 2.0 percent
this year.
"Of course, as the government we are aware of possible threats and we are
ready to react to that with even faster consolidation," Pociatek said. The
Slovak government also plans a raft of structural reforms.
To offset imported inflationary pressure from oil, Bratislava may decide to
revalue the crown <SKK=> when it fixes the final conversion rate to the euro in
July, sources said.
Asked if Slovakia would revlue the crown after last year's 8.5 percent
upward adjustement against the central parity rate, Pociatek said:
"I cannot rule it out."
(Additional reporting by Krista Hughes)
(Reporting by Marcin Grajewski and Jan Strupczewski, editing by Nick Edwards)
