SLOVENIA ERM II experiences and Euro Changeover

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- SLOVENIA - ERM II experiences and Euro
Changeover
MF Seminar "Practical Aspects of the Euro
Introduction in the Czech Republic"
Prague, 28 June 2006
Andrej Rant
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• ERM II entry
• Policy commitments
• Lessons from ERM II participation
• Convergence assessment and Euro changeover

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ERM II entry

• 1. Joint BoS / Government programme November
  2003
• - assessment of convergence
• - assessment of policies
• - consultations with social partners
• 2. EU Consultation process
• - contacts
• - country assessment
• - formal request
• 3. Decisions
• - choice of central parity
• - joint policy statement

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Policy commitments

• 1. Demand management
• - relevance of fiscal policy
• - convergence of interest rates
• 2. Competitiveness
• - stability of the ER
• - labor costs development
• - structural reforms
• 3. Financial deepening
• - importance of supervision

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Lessons

• 1. Dynamic credit activity
• - robust economic growth
• - convergence of interest rates
• - fight for market share
• 2. Competition in financial intermediation
• - new competitors mutual funds
• - new investments opportunities for savings
• - shift in banks funding structure
• - pressure on cost and income structure
• 3. Euroization of credits
• - no perception of ER risk

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Convergence assessment

• Convergence assessment
• individual request for Convergence Report on
  March 2, 2006
• positive convergence assessment in the
  Convergence Reports of the ECB and the Commission
  on May 16, 2006
• positive opinions of European Parliament and
  European Council in composition of Head of States
  and Governments on June 15, 2006
• waiting for ECOFIN decision on July 11, 2006
• Euro adoption on January 1, 2007

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Convergence assessment

• Member States obligations
• - establishing conditions for sustainable and
  non inflationary growth
• - adoption of single European currency with
  stability of prices as a basic
• goal of monetary policy
• - engagement in accordance with the principles
  of price stability, healthy
• public finances, stable monetary conditions
  and sustainable balance of
• payments
• Significance of sustained results of convergence
• - fulfillment in a prolonged period of time, not
  just in one moment of time
• - assessment of capability to react on existent
  and future challenges
• Responsibility for stability of the euro
• - Observance of Stability and Growth Pact rules
• - ERM II operational test for fiscal policy to
  act in monetary conditions of the
• eurosystem

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Convergence assessment

• Risks to be monitored in Slovenia
• Managing demand in the conditions of financial
  deepening
• Potencial VAT rates increase
• Secondary effects of oil prices growth
• Growth of controlled prices
• Long term sustainability of public finances
  (population aging)
• Maintaining moderate wage growth with lagging
  behind the productivity growth
• (importance of social agreement)
• - Competitive environment in domestic market

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Eurochangeover
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Eurochangeover
Changeover plan in Slovenia 1. Scenario
chosen Big Bang 2. Coordination od
activities national coordination body,
co-chaired by BoS in MF 3. Changeover
rules - Council Regulations - Changeover
national law