Risks of Slovakia´s Membership in the European Monetary Union

[01.10.2004, Peter Gonda, EUROPEAN UNION AFFAIRS]

The way and speed at which the European currency is being introduced confirms that the euro is a tool of political centralisation in the EU. A free trade zone without any barriers having various conditions and currencies could represent an alternative to this monetary integration with one centrally forced currency.

The Slovak Government and National Bank of Slovakia make efforts leading to Slovakia´s joining the Economic and Monetary Union (EMU) in the shortest possible time.

The author analytically evaluates and draws our attention to the serious risks of substituting the euro for the Slovak crown, which also means giving up domestic monetary policy and exchange rates in favour of more centralised monetary policy (implemented by the ECB).

The current systemic problems in the Eurozone (embodied in the increased instabillity within the Zone), and substantially different economic conditions in Slovakia when compared to the conditions in the EMU countries, the author considers to be initial barriers for fast accession to the Eurozone. But according to the author the main risks for Slovakia´s membership in the EMU in general result from a bureaucratically forced termination of the crown (providing the information about prices and market situation), and from the centralised decision making as regards monetary policy. The real risks will thus accumulate and lead to an increase of costs for people and firms. The author points out that an earlier loss of domestic currency rate might mean higher inflation or a higher unemployment rate. The author believes that the government which really adheres to the traditional values of the western civilisation, and does not want its citizens to assume an inadequate risk would postpone its decision about EMU accession. On the contrary, such a government would condition the decision by pushing for developments in the Union which should bring about an abandonment of today´s harmonizing and regulatory tendencies, and return to the fundamental principles of the market and competition.

Author is an analyst for the Conservative Institute of M. R. ©tefánik.

The article is based on a series of lectures Slovakia and the EMU - Without Stars in the Eyes (Bratislava, Slovakia, 10 July 2003) and Risks of Slovakia´s Accession to the Eurozone (Bratislava, Slovakia, 7 September 2004.

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