Brussels - Slovakia was Wednesday given the green light to become the 16th country to join the single European currency, the euro, as from January 1, 2009. "Slovakia has achieved a high degree of sustainable economic convergence and is ready to adopt the euro on 1 January 2009," said the European Union's economic and monetary affairs commissioner, Joaquin Almunia, in an assessment echoed by the European Central Bank (ECB).
Once the decision is formally endorsed by the European Parliament and then by EU finance ministers meeting in July, Slovakia's entry into the elite euro group will seal its transition from a former communist member of the Soviet-led Warsaw Pact to a full-fledged capitalist democracy.
The news was welcomed in Bratislava, where Prime Minister Robert Fico called the European Commission's recommendation "a vote of confidence for Slovakia and its economic power".
But while both the commission and the ECB said Slovakia had fulfilled all of the necessary criteria needed to join the euro, both bodies urged its government to keep inflation in check, reduce unemployment and further liberalize the economy.
Fico acknowledged as such, telling reporters in Bratislava: "As you can see, we have not prepared any champagne today. Instead, we want to concentrate on the work that still lays ahead."
With opinion polls suggesting most Slovaks fear that euro membership may bring about higher consumer prices, Fico said the government would be vigilant against "speculators" who planned unfair price hikes during the switch over to the new currency.
His finance minister, Jan Pociatek, said the government also planned to launch a publicity campaign aimed at convincing people of the benefits of euro membership.
"We have to respect (the fact) that a pretty large part of the population is afraid of the process," Pociatek said.
At 2.2 per cent of gross domestic product, Slovakia's budget deficit is comfortably within the strict 3-per-cent rule for euro member states. Likewise, the country's public debt is about half the 60 per cent of GDP that is required under the Maastricht Treaty for joining the euro.
Slovakia's 2.2-per-cent inflation rate is also well below the 3.2- per-cent reference rate for euro candidate states.
But in its report, the ECB went on to call on Slovakia to take steps to ensure the sustainability of its key fiscal parameters, especially inflation, in light of surging energy prices.
"Achieving an environment conducive to sustainable convergence in Slovakia requires, inter alia, the implementation of a sustainable and credible fiscal consolidation path," the ECB wrote in a report issued in Frankfurt.
This includes measures to address high structural unemployment and ensure wage increases are linked to labour productivity.
In its report Wednesday, the commission said none of the other nine EU countries planning to join the euro had met "all of the convergence criteria".
The nine countries are: Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania and Sweden.
With Britain and Denmark having negotiated opt-out clauses, the euro area is now not expected to widen again until 2012.
In another widely-expected move, the EU executive also proposed closing the excessive deficit procedures that it had brought against Italy, Poland, Portugal and Slovakia.
This follows commission figures showing that all four euro countries had managed to reduce their budget deficits to within the 3 per cent limit in 2007.
Wednesday's decisions by the EU executive came as officials in Brussels were intent on celebrating the 10th anniversary of the creation of the EU's Economic and Monetary Union (EMU).
In a statement, officials called EMU "a resounding success" that had helped bring about an era of low inflation and low interest rates, improved fiscal discipline and greater stability.
But while the euro, which is used regularly by 320 million citizens, has succeeded in establishing itself as a major international currency, officials also acknowledged that there was still work to be done.
Officials said one of euro area's main priority should be to deepen economic policy coordination among member states and give the currency a stronger voice on the international stage by joining forces in international bodies such as the International Monetary Fund.
"EMU is a solid construction and a remarkable achievement," said Almunia.
"But the experience of its first decade shows that economic policy decisions in one country may have important effects on others. Therefore we need to keep improving the economic governance of the euro area through strong and binding political commitments," he added.
