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EU raises Slovakia’s deficit as it battles for euro membership

The European Union’s statistics office revised upwards the deficit for Slovakia Monday adding to the pressure on the new EU state as it attempts to knock its finances into shape for joining the euro at the start of 2009.

The EU’s statistics office said Slovakia’s deficit came in at 3.7% last year, compared to a previous estimate of 3.4% as a result rolling the nation’s deficit further away from the strict 3% rule for euro member states. Slovakia’s deficit stood at 2.8% in 2005. The nation aims to cut its 2007 public deficit to 2.7% of GDP. The release of the EU’s latest estimate comes as the government in Bratislava launches its final push to bring into the nation’s public finances into order ahead of the rulings early next year by the European Commission and the European Central Bank on Slovakia’s candidacy to join the euro.

However, both economists and Bratislava’s ruling elite are quietly confident that Slovakia will manage to surmount the hurdles to become in January 2009 what will be then the eurozone’s 16th member state. This is particular the case as based on the European Commission method of harmonizing inflation data Slovakia’s annual inflation rate by March or April next could come in as low as 1.6%, which is within the reference rate for euro candidate nations. At 40%, Slovakia’s debt is already well within the 60% of GDP target.

If successful, Slovakia will be the second former communist state after Slovenia to adopt the euro with eurozone membership representing the next step in its drive towards European integration following its EU membership in May 2004. Malta and Cyprus are the next of EU newcomers to join the euro with the membership of the two nations in January 2008 expanding the eurozone to 15 member states. (m&