(Updates with finance minister, central banker, Fitch upgrade)
By Marcin Grajewski
BRUSSELS, July 8 (Reuters) - Slovakia cleared the final
hurdle on Tuesday towards joining the euro zone on Jan. 1, 2009,
when European Union finance ministers set the rate at which the
single currency will replace its crown <EURSKK=>.
The EU's 27 ministers fixed the final rate for the Slovak
crown at 30.1260 to the euro, which Slovak officials said would
help tame inflation while supporting the country's already
impressive growth rates.
"Twenty years after the fall of Berlin Wall, Slovakia is
becoming the first country from behind the former Iron Curtain
to adopt the euro," said French Economy Minister Christine
Lagarde, whose country holds the EU's rotating presidency.
EU Monetary Affairs Commissioner Joaquin Almunia said
adopting the euro would bring greater price stablity, more jobs
and forein investment as long Bratislava continued to pursue
sound fiscal policies.
The exchange rate is the same as the central parity level in
the Exchange Rate Mechanism, the currency stability test for
joining the euro. In the ERM-2, currencies are allowed to
fluctuate within a narrow margin around a parity rate.
"It (the exchange rate) will support low inflation
development," Slovak central bank governor Ivan Sramko told a
news conference.
Credit rating agency Fitch upgraded its rating for Slovakia
after the ministers' decision.
Finance Minister Jan Pociatek said adopting the euro would
increase economic growth by one percentage point. Slovakia, a
major car producer, saw its economy expand by 10.4 percent in
real terms last year, the highest rate in the EU.
BENEFICIAL
"Euro entry will be beneficial for our economy. It will
attract foreign direct investment and ... increase gross
domestic product growth by one percentage point," Pociatek said.
EU leaders last month approved Slovakia's bid to become the
euro zone's 16th member, despite European Central Bank concern
over sustainability of its inflation rate.
In late May, Slovakia strengthened the crown's central
parity rate in ERM-2 by 15 percent in local terms partly to
fight inflation.
Inflation is now 4.0 percent, the same as in the euro zone,
but some economists say it may grow as it did in Slovenia after
it adopted the euro in 2007.
Slovakia will be the fourth of the bloc's new members that
joined the EU in 2004 and 2007 to adopt the euro. Much smaller
Slovenia entered the single currency zone in 2007, followed by
Cyprus and Malta this year.
Bigger EU newcomers Poland, the Czech Republic and Hungary
are expected to adopt the euro well after 2010.
Pociatek said an intensive information campaign about the
euro would be his priority as well as measures to prevent
retailers rounding up prices when the euro replaces the crown.
Euro adoption is seen as the biggest international
achievement of leftist Prime Minister Robert Fico's government,
made possible by the liberal economic reforms of his
centre-right predecessor, Mikulas Dzurinda.
However, Pociatek has faced opposition allegations that
information about the May currency revaluation leaked and that
local private equity groups booked profits of tens of billions
of dollars in subsequent insider trading.
The government has rejected the allegations as groundless,
although the central bank has begun an inquiry into unusually
large volumes of trade on the small local currency market
shortly before the revaluation.
(Additional reporting by Peter Laca in Bratislava; Editing by
Gerrard Raven)
