Slovakia may hinder euro zone expansion
If adopting the euro is followed by high inflation in Slovakia, the other countries planning to join the Euro zone before 2015 will suffer a delay, states the recent weekly survey on emerging markets by London-based financial analyst JP Morgan.
The current deflation is not sustainable because Slovakia’s convergence process has not finished yet. GDP per capita was 62% and price level about 60% of those in the Euro zone at the end of 2007. If Slovak inflation is 1 or 2 percentage points higher than the target set by the European Central Bank (ECB) and the macro economy is relatively balanced, ECB will probably cease to worry about admitting the other countries.
Otherwise ECB might even veto that they enter the ERM 2 (Exchange Rate Mechanism 2). The relatively high inflation in the convergence economies of the region is not a failure of economic policy but a natural process, says the survey, adding that it has been considered that the conditions for Euro adoption should be adjusted to the inherent nature of the emerging economies, or there should be new conditions added, e.g. that of a minimum GDP per capita or a price level near that in the Euro zone. (Népszava, Gazdasági Rádió)
SUPPORT THE BUDAPEST BUSINESS JOURNAL
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.