Euro Adoption in Slovenia
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Euro Adoption in SloveniaEuro Adoption in Slovenia
Boštjan JazbecMember of the Governing Board
The views expressed are those of the author and not necessarily those of the Bank of Slovenia.
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ContentsContents
• Macroeconomic Stabilization and Transition• Macroeconomic Perfomance• Maastricht Criteria• Entry to ERM2 and Adoption of Euro• Conclusions
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Macroeconomic Stabilization and Macroeconomic Stabilization and TransitionTransition
• Better initial conditions than in other transition economies• Money-based stabilization program• Rehabilitation of the banking sector• Sound macroeconomic performance• Inflation and Exchange Rate
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Slovenia Slovenia vs.vs. Greece Greece vs.vs. PortugalPortugal
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Synchronization of Business CyclesSynchronization of Business Cycles
-30
-20
-10
0
10
2002 2003 2004 2005 2006
SloveniaEUGermany
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Inflation Criterion FInflation Criterion Fulfilmentulfilment
0
1
2
3
4
5
6
7
8
2003 2004 2005 2006
Inflation (current)Inflation (12-monthly average)Criterion reference value
(year-on-year rate, %)
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Country Risk PremiumCountry Risk Premium
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Exchange Rate DevelopmentExchange Rate Development
239,4
239,5
239,6
239,7
239,8
239,9
240,0
j a s o n d j f m a m j j a s o n d j f m a -0,10
-0,05
0,00
0,05
0,10
0,15 Spot rate Exchange office rate Central rate
EUR/SIT
%
2005 2004 2006
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UnemploymentUnemployment
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Euroization of Bank Assets and LiabilitiesEuroization of Bank Assets and Liabilities
10%
20%
30%
40%
50%
2003 2004 2005 2006
Foreign currency liabilities / total liabilities
Foreign currency lending / total lending
(%)
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GDP Composition by ActivityGDP Composition by Activity
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Maastricht criteriaMaastricht criteria at the time of fulfilment at the time of fulfilment
Price stability Exchange rate Interest rates
Inflation (12 month
average, %)
Government balance (% BDP)
Government debt(% BDP)
Participation in ERM II
Long term interest rate (12 month
average, %)
May 2006 2005 2005 May 2006
Reference value 2,7 -3,0 60,0 2 years 5,9
Czech Republic 4 2,1 -2,6 30,5 no 3,5
Estonia 4 4,2 1,6 4,8 since 28.06.2004 3,9
Cyprus 3 2,0 -2,4 70,3 since 02.05.2005 4,4
Latvia 3 6,9 0,2 11,9 since 02.05.2006 3,7
Lithuania 4 2,9 -0,5 18,7 since 28.06.2004 3,7
Hungary 1 3,0 -6,1 58,4 no 6,6
Malta 1 2,8 -3,3 74,7 since 02.05.2006 4,4
Poland 4 1,3 -2,5 42,5 no 5,0
Slovenia 5 2,4 -1,8 29,1 since 28.06.2004 3,7
Slovakia 3 3,5 -2,9 34,5 since 28.11.2005 3,6
United Kingdom 3 2,1 -3,6 42,8 no 4,3
Denmark 4 2,0 4,9 35,8 yes 3,4
Sweden 4 1,2 2,9 50,3 no 3,4
EU-12 2,3 -2,4 70,8 3,5
EU-25 2,3 -2,3 63,4 3,7
Notes: Grey background indicates fulfilment of the criteria.
CONVERGENCE CRITERIA
Fulfiled criteria
Public finances
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Timetable for EuroTimetable for Euro
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Financial intermediationFinancial intermediation
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Catching-up processCatching-up process
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Slovenian financial sector (total assets)Slovenian financial sector (total assets)
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Increasing indebtIncreasing indebtedednessness
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Growth rates of loansGrowth rates of loans
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Capital adequacy indicators for Capital adequacy indicators for Slovenian banksSlovenian banks
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Challenges aheadChallenges ahead
• Inflation
• Keeping competitiveness
• Financial sector development
• Labor market reforms
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Sources:
Financial Stability ReportPrice Stability Report
www.bsi.si