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Ten Years of the Euro – Inspiration for the Czech republic Euro: Anchoring Slovakia in the Turbulent Times Praha, November 25, 2008 Elena Kohútiková VÚB, a.s. Euro: Good Thing for Slovakia in Good Times… For Slovakia, benefits of the adoption of single currency were thought to outweigh the costs by big margin even when the global economy was in full swing financial and transaction costs administrative costs pros forex risk Long-term (20 year) increase of GDP by 7-20 % costs of currency changeover (split over 5 years) cons 0 0,1 0,2 (% GDP) 0,3 0,4 loss of independent monetary policy 2 Euro: Great Thing for Slovakia in Bad Times! The current global financial crisis makes the pros v. cons calculations even more convincing Indeed, thanks to the forthcoming adoption of the euro, Slovakia has been to a large extent insulated from the pressure that storms our neighbors. 3 Anchoring the Currency V4 currencies vs EUR (% vs. 1.1.2008) 11% 9% 6% 4% 1% -2% -4% -7% -9% EUR/SKK EUR/PLN -12% -14% I-07 IV-07 VII-07 EUR/CZK EUR/HUF X-07 I-08 IV-08 VII-08 X-08 4 Anchoring the Interest Rates Spread of 10-year V4 bonds vs Bund 8.00 HU 7.00 PL CZ 6.00 SK 5.00 4.00 3.00 2.00 1.00 0.00 -1.00 VI-07 VIII-07 X-07 XII-07 II-08 IV-08 VI-08 VIII-08 X-08 5 Anchoring the Rating Government bond rating Aa2 Aa1 Outlook Aa2 Aa3 A1 Hungary Negative Czech Rep. Positive Poland Stable Slovakia Positive A2 A3 Baa1 Baa2 Baa3 Ba1 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 Ba2 6 Boosting Reforms and Real Convergence GDP per capita in V4 countries (in PPP, EU27=100) 85 80 75 70 65 60 55 50 45 Czech Republic Hungary Poland Slovakia 40 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 7
