(Makes clear Slovakia will be euro zone's poorest state, not
EU's)
By Peter Laca and Jan Lopatka
SACA, Slovakia, July 16 (Reuters) - "What can I buy with
300?" cries Marca Tancosova, a Roma woman worried that her 9,000
crown ($473.9) welfare check will shrink after Slovakia adopts
the European Union's common currency next year.
Tancosova, a character in a play being performed in the
eastern Slovak town of Saca, finally rejoices after her family
explains the real value of her income will not change, and she
can buy exactly the same as before the Jan. 1 euro adoption.
If only it were that easy.
Fearing public confusion and complaints of rising prices,
the government of leftist Prime Minister Robert Fico has
launched a 160 million crown ($28.96 million) campaign to
explain what will happen when Slovakia becomes the euro zone's
poorest member when it switches its crowns for euros.
The theatre troupe is part of that push, touring the country
to spread information about the euro among its Roma minority, a
group rights activists say could number half a million people
largely living in poverty on the margins of society.
"The aim was to pass on the information about euro adoption
in a way that is interesting," Karel Adam, the Romathan group's
chief and violinist told Reuters as the actors prepared to
perform the mixture of songs, dances and sketches.
"The idea to include our theatre came from the national
bank, because we are closer to the Roma community, and we
understand the mentality," Adam said.
The play centres on a Roma family returning from a stay in
Ireland, and features barefoot dancers in traditional colourful
dresses decorated with gold.
The Roma, or gypsy, people often receive little education
and struggle to find jobs. Thousands in the country's east live
in slums with no running water or electricity, a stark contrast
with prosperous capital Bratislava, 450 km (280 miles) west.
Economists say poorer populations are most at risk of
potential negative effects from the euro switchover, which could
include a spike in inflation and a widening of the wealth gap if
wages and pensions are not raised at the same rate.
Fico, who won the 2006 election on promises of more welfare
after austerity measures adopted by the previous administration,
has warned firms against using the switch as an excuse to hike
prices and threatened to jail those who do. Anecdotal evidence
suggests such abuse has happened in other euro joiners.
INFLATION FEAR
Slovakia will become the second former Communist country
after Slovenia to join the 15-nation currency bloc, crowning two
decades of transformation from a command economy.
But, with around 62 percent of the euro zone's average gross
domestic product per capita, it will be the area's poorest state
and will have the furthest to catch up in income and prices.
Price convergence with Western Europe can only come via
inflation as, pinned to the euro, the crown cannot appreciate --
unlike in neighbouring Hungary, Poland and the Czech Republic,
which have put off euro adoption and can watch their currencies
firm for several more years.
An opinion poll in April showed nearly three quarters of
Slovaks are worried the switchover will push up prices. Many
economists are of the same opinion.
A Reuters poll showed on Wednesday that 22 of 29 analysts
did not think Slovakia would be able to hold inflation within EU
criteria stating price growth must not exceed 1.5 percentage
points over an average of the three lowest EU states (for story,
double-click on [].)
"Prices in Slovakia are generally cheap and will need to
adjust upwards," said Nigel Rendell at RBC Capital Markets.
Slovenian inflation soared to 6.8 percent in June, by far
the highest in the euro zone.
POOR ARE MOST EXPOSED
Eastern Europe's estimated 9-12 million Roma are the poorest
sector of society in the region, where living standards are
generally lower than among their western neighbours.
Analyst Zdenek Lukas of Vienna's Institute for International
Economic Studies said inflation always hits the poor hardest.
"The highest inflation growth dynamic is in prices of
energy, which is a very important part in the consumer basket of
the poor population. Likewise, a great part in the consumer
basket of the poor population is food," Lukas said.
Most of the play's 300 spectators in Saca were aware of the
euro's arrival, and those questioned usually knew the conversion
rate would be around 30 crowns per euro -- close to the official
30.1260 set last week.
But Monika Cisarkova, a 36-year single mother old on
maternity leave who came to see the play with some of her five
children, is worried. She lives on 4,760 crowns per month in
benefits, which would be 158 euros in January.
"It is already hard to live on what we are getting now. It
will be even harder when the euro comes," she said.
"Prices will go up. They are already rising now."
(Editing by Catherine Evans)
