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| OECD tells Slovakia to continue reforms after euro |
| Bratislava, 17.07.2008 |
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| BRATISLAVA, July 17 (Reuters) - Slovakia should use adoption of the euro currency in 2009 to deepen reforms that will boost competition and support economic growth, the Organisation for Economic Cooperation and Development said on Thursday.
The OECD, grouping 30 mostly industrialised economies, said in a report the euro changeover will boost prices in several sectors, but the overall impact on inflation should be small.
Slovakia will become the 16th euro zone member in January after the government of leftist leader Robert Fico reduced the fiscal deficit and kept inflation low enough to meet the entry conditions despite a global surge in energy and food costs.
The entry will cap a decade of transformation from a central European laggard to the economy with the European Union's fastest growth rate of 10.4 percent last year, thanks largely to market-friendly measures taken by the centre-right coalition Fico beat in a 2006 election.
Andreas Woergoetter of the OECD's Economics Department said many euro zone members had experienced reform fatigue after they joined the single currency area, expecting economic growth to continue without further measures.
'That, of course, is not going to happen,' Woergoetter told journalists, presenting the OECD's paper on euro adoption impact on inflation and interest rates in Slovakia (www.mzv.sk).
'Therefore, we encourage very much the Slovak government to continue the reform momentum and use the euro adoption to go further with reforms that introduce more competition on markets,' he said.
Among the major challenges is to reduce regional differences, which will require a boost in labour force mobility for example by helping to establish functioning rental housing market.
The government should also focus on removing bureaucratic obstacles limiting inflow of goods and services to the local market as additional supply can help tame inflation.
Opinion polls show many Slovaks expect the adoption of the euro to boost prices and fear similar inflation jump as in Slovenia, the first ex-communist EU member
to have joined the euro area.
The OECD said the euro changeover was likely to significantly boost prices in a number of sectors, but that the overall impact on inflation was likely to be small.
It expected the euro adoption to increase aggregate consumer prices by 0.32 percent between July 2008 and July 2009. Latest data showed Slovak annual inflation rate at 4.3 percent in June.
(Editing by Victoria Main)
Keywords: SLOVAKIA EURO/OECD tf.TFN-Europe_newsdesk@thomsonreuters.com slj
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