Slovakia became the 16th nation to join the euro region, after record advances in economic growth and its currency koruna helped the eastern European country qualify to adopt the common currency.
Slovakia, which joined the European Union in 2004, is the second former communist nation to complete the switch after Slovenia. It passed up Hungary, Poland and the Czech Republic into the euro zone at a time other candidates are scrambling to make the change to shield themselves from the brunt of the worldwide financial crisis.
"We are waving goodbye to the Slovak currency, to which we have become strongly emotionally attached," said Prime Minister Robert Fico, who withdrew 100 euros ($140) from an ATM bank machine in the Parliament building near Bratislava Castle.
Slovakia was able to keep inflation below the euro-adoption limits because of the record strength of its currency, the koruna, which capped import prices. Its budget deficit was kept under control because of increased revenue from economic growth.
A worker holds 50 euro cent coins as they are prepared for minting in Kremnica, Slovakia. Bloomberg News
Gross domestic product expanded a record 14.3 percent in the fourth quarter of 2007 and grew an annual 7 percent in the third quarter of 2008. The global crisis will slow growth to 4 percent next year, the Paris-based Organization for Economic Cooperation and Development said on Nov 25, still faster than the projected 2.5 percent rate for the Czechs, 3 percent for Poland and a recession for Hungary.
While the Slovak koruna remained locked to the euro in preparation for yesterday's changeover, the Polish zloty lost 24 percent, the Czech koruna dropped 11 percent and the Hungarian forint fell 13 percent in the second half.
The Slovak currency was converted at a rate of 30.126 against the euro, an 11 percent appreciation from a year ago.
Euro adoption has also acted to protect Cyprus, an eastern Mediterranean island, against the effect of the global crisis since it dropped the Cypriot pound for the euro 12 months ago, said Athanasios Orphanides, the head of the central bank and another member of the ECB executive council, in an e-mailed statement.
Slovakia's adoption will act "as a shield against the global turmoil," agreed Elizabeth Gruie, a currency strategist at BNP Paribas SA in London. "It is clearly a buffer against the financial stress we've had."
Near Hviezdoslavovo Namestie, in the heart of Bratislava, Robert Poor, a 27-year-old graphic designer, was gearing up for the celebration before midnight, carrying a packet of euro coins he received as a Christmas present.
Unlike the neighboring Czech Republic, once a federal partner in defunct Czechoslovakia, Slovakia decided that quick euro adoption will benefit the population and the economy.
Slovakia may be the last to join the ECB board for some years as the Frankfurt-based institution may be more wary about widening the euro region for now.
Executive board members, including Juergen Stark, say the current monetary union is being tested by the financial meltdown and are concerned that many new members, who founded free-market systems starting in 1989, have yet to prove they have stable enough economic development, economists say.
Poland will probably be the next country to make the switch, in 2012, said Juraj Kotian, the chief central European economist at Erste Bank AG in Vienna. It may be followed by Hungary, helped by a bailout package from the International Monetary Fund earlier this year.
(China Daily 01/02/2009 page4)