(Updates with PM Fico)
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 stability, more jobs
and foreign investment as long as Bratislava continued to pursue
sound fiscal policies.
Slovak Prime Minister Robert Fico said he was happy with the
rate, although a round figure of 30.0 or 30.1 would have been
more practical.
"On one hand, it boosts the value of peoples' savings, on
the other hand it does not endanger strong growth of the
economy," Fico told a news conference in Bratislava.
The exchange rate is the same as the central parity level in
the Exchange Rate Mechanism (ERM-2), the currency stability test
for joining the euro.
"It (the exchange rate) will support low inflation
development," Slovak central bank governor Ivan Sramko told a
news conference.
The crown has been trading near the parity, which was widely
expected to become the new conversion rate. It stood at 30.287
to the euro at 1600 GMT, from 30.223 late on Monday.
Credit rating agency Fitch upgraded its rating for Slovakia
by one notch to 'A+' after the ministers' decision.
Finance Minister Jan Pociatek said adopting the euro would
increase economic growth by one percentage point. Slovakia,
which exports cars and electronics, saw its economy expand by
10.4 percent last year, the highest rate in the EU.
The euro adoption is to a large extent the result of liberal
economic reform carried by Fico's predecessor Mikulas Dzurinda.
The country's path toward the euro shows the way for other
central European ex-communist states, which are expected to take
at least another four or five years to join.
The Slovak crown will disappear after just 16 years since
its birth in the peaceful break-up of Czechoslovakia in 1993.
BENEFICIAL
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.
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 Fico's government, but Pociatek has faced
opposition allegations that information about the May currency
revaluation leaked and that local private equity groups booked
profits of tens of millions of dollars in 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 and Victoria Main)
