Slovakia Joins the Eurozone Exactly on the 10th Anniversary of the Euro’s Introduction

Exactly on the tenth anniversary of the introduction of the European common currency, Slovakia joins the eurozone as its 16th member, which will now have 328.6 million inhabitants out of a total of 499.7 million inhabitants of the European Union.

"I am extremely pleased that the 10th anniversary of the euro will be celebrated with Slovakia’s entry as a new member. By joining the euro, Slovakia will find itself at the economic and political center of Europe, in less than five years since joining the European Union. This is a great achievement," emphasized European Commission President Jose Manuel Barroso. The euro was introduced on January 1, 1999, by 11 EU member countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. At that time, the exchange rates of the national currencies of these countries were definitively fixed against the euro. Six months later, the European Central Bank was established in Frankfurt, responsible for maintaining the stability of the common currency. Greece joined the eurozone on January 1, 2001, when it met the convergence criteria. Euro banknotes and coins were physically put into circulation on January 1, 2002. The first of the new member countries to adopt the euro was Slovenia on January 1, 2007, followed a year later by Cyprus and Malta. Among the old member countries, Denmark and the United Kingdom did not adopt the euro, which, according to the Maastricht Treaty, have the right to opt-out. Sweden is also de facto exempt as it found a loophole in the law by not meeting the convergence criteria, and its citizens rejected the euro in a referendum. All new members of the European Union are obliged to adopt the euro once they meet all criteria – price stability, a budget deficit of less than 3 percent of GDP, public debt not exceeding 60 percent of GDP, exchange rate stability, and low-interest rates. The exchange rate of the Slovak koruna is fixed at 30.1260 for one euro. The Slovak central bank, as well as commercial banks, will exceptionally operate on New Year’s Day and during the upcoming weekend. In the first two weeks, citizens will be able to pay in korunas and euros, and from January 16, the koruna will be definitively withdrawn from circulation.

Prices in stores will be displayed in both euros and korunas throughout 2009. The introduction of the euro is considered a significant success for the European Union, and its advantages have particularly shown during the financial crisis that this year struck Europe from the United States. According to some estimates, only the German mark among European currencies would have managed to maintain stability during this financial crisis. Since the introduction of the euro, inflation has significantly fallen below 2 percent, while in the 1990s it averaged 3.5 percent, in the 1980s 7.5 percent, and in the 1970s 9.3 percent. Since January 1, 1999, 16 million jobs have been created in the eurozone, and the unemployment rate has fallen from nine to seven percent. The main complaints in the early years of the euro related to the existence of a single discount rate for the entire eurozone, which prevented some member countries from lowering interest rates and reducing the cost of money to stimulate economic growth. Complaints also concerned the overvaluation of the euro against the US dollar, which harmed exporters. After the current financial crisis, these complaints have been forgotten, and discussions about adopting the euro have begun in Denmark, Sweden, and even the United Kingdom.

Nobel Prize winner in Economics in 2006, Milton Friedman, emphasized that the euro is not a solution but a source of problems and predicted that the European currency would be abolished during the first major recession. After the eurozone entered a recession in 2008, Friedman’s predictions are far from being realized. The eurozone accounts for 16.4 percent of the total world gross domestic product. The United States, which has slightly fewer inhabitants, 302 million, accounts for 21.6 percent of global GDP, while China, with 1.3 billion inhabitants, accounts for 10.9 percent of the world GDP. (Hina)