(Updates with Juncker comments)
By Marcin Grajewski
LUXEMBOURG, June 3 (Reuters) - European Union finance
ministers gave Slovakia the green light on Tuesday to join the
euro zone next year, urging the country to be ready to fight
inflation with tight fiscal policies.
"We are happy to see Slovakia join the euro zone on January
1, 2009," Jean-Claude Juncker, who chairs the Eurogroup of euro
zone finance ministers, told reporters.
Asked about the ministers' advice for Slovakia, he said:
"Keep a strong eye on inflation and be as coherent as possible
when it comes to fiscal policies, but the last remark is for all
member states."
A letter, seen by Reuters, that the ministers will give to
their leaders ahead of an EU summit this month said Slovakia met
all criteria to become the euro zone's 16th member, despite
European Central Bank concern over the country's inflation.
"The ministers ... underline the need for Slovakia to be
vigilant and to implement budgetary and structural policies
supportive of price stability," the letter said.
Slovakia will become the fourth of the bloc's new members
that have joined the EU since 2004 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.
EU leaders are now certain to give Slovakia the political
green light at the June 19-20 summit to adopt the euro.
EU finance ministers will in early July give the final
blessing for the ex-communist country's euro adoption by setting
the final exchange rate between the Slovak crown <SKK=><EURSKK=>
and the single currency.
Slovakia revalued the crown's central parity rate last week
in the ERM 2, an exchange rate system that is a proving ground
for the euro, by 15 percent in local terms and 17.6472 percent
in international terms to 30.1260 to the euro.
Many analysts expect the new central parity rate to become
the final conversion rate for the crown.
CONCERNS BRUSHED ASIDE
The executive European Commission and the ministers brushed
aside ECB concerns about the country's ability to keep inflation
low in a sustainable way, a vague euro entry criterion.
Other criteria involve having a budget deficit, if any,
below 3 percent of gross domestic product, public debt below 60
percent of GDP, sufficiently low long-term interest rates and a
stable currency in the ERM 2 system.
In the ERM 2, a currency is allowed to fluctuate by +/-15
percent around the central parity rate.
Some German members of the European Parliament urged the
ministers last week to reject Slovakia's euro bid on grounds
that its currency had not been stable in the ERM 2 -- two
revaluations being the evidence.
But under EU rules, revaluation is permitted unlike
devaluation, which can be a reason for rejecting a candidate's
euro entry application.
(Editing by Dale Hudson)
