Slovakia became the 16th member of the euro zone on January 1st. Jaromir Chabr, the Chief executive officer and Chairman of the board of our subsidiary KBB in Slovakia, talks about the impact of this event.

The adoption of the euro is without any doubt the second major event connected to Slovakia’s accession to the EU. After entering the European Union in 2004, successive governments have worked towards an early entry into the euro zone. And thanks to various reforms, we have done very well: Slovakia entered ERM II on 28 November 2005 and is the only country in history to have changed its central parity to the euro twice – on March 19, 2007 and May 29, 2008. Between ERM II accession and the fixing of the final conversion rate, the Slovak koruna was upwardly revised by 21.6%, a fact describe by analysts as a unique success story for the Slovak economy and its currency. The official conversion rate of SKK 30.1260 to EUR 1 is unanimously considered by both industry and consumers as perfectly balanced as it takes not only into account present economic status but also creates good conditions for sustainable GDP growth in the future.

Joining the euro zone is another major advantage for attracting new investments to Slovakia and facilitating economic cooperation with European counterparts. Exchange rate risk has been removed for both exporters and importers, which are benefiting from lower transaction costs and easier planning schemes. Combined with favourable labour costs, the result is that doing business in Slovakia has become more stable and dependable.

In the banking sector, the switch to the euro generated considerable costs related to internal banking and IT systems, and has resulted in the partial loss of fees in FX transactions and foreign payment operations. On the other hand, banks will profit from predicted higher payment activities as the barriers for the business sector fall, thus stimulating further growth in trade.

To sum up the whole “euro success story”, it is clear that by entering the euro zone and meeting strict Maastricht criteria on monetary and fiscal stability, Slovakia has proved that it rightfully belongs to the group of the most developed countries in Europe.