Before and After Maastricht:The Case of Slovenia

Boštjan JazbecMember of the Governing Board

Bank of Slovenia

Tabor, 23 May 2008

Views expressed are not necessarily views of the Bank of Slovenia.

Outline

Problems with Maastricht Criteria Fulfilment

Exchange Rate: Shock Generator or Absorber?

Before and After Maastricht

The Case Study: Slovenia

Strategies for Euro Adoption

Wait for Real Convergence to Take Place

Benefits of Euro Adoption?

Beat the Mastricht Inflation Criterion by

Exchange Rate Manipulation

Entusiasm for Inflation Targeting

Economics or Politics?

Change of Maastricht Criteria requires change of Treaty

Problem with ECB Governance

The Case of Slovenia

May 2004: Entry to EU

June 2004: Entry to ERM2

January 2007: Adoption of Euro

Real Convergence Story?

Where Do We Stand Today?

Catching-up Process

Inflation Criterion: Slovenia 2004 - 2008

Is this Balassa-Samuelson Effect?

Structure of HICP

Food Prices in Slovenia and EMU

Activity, Employment and Wages

GDP Growth by Components of Expenditure

Contributions to Employment Growth

Financial Deepening

Lending to Domestic Private Sector

Interest Rates in Slovenia

Loans to Non-financial Corporations Loans to Households

Financial inflows

Current Account Development

Conclusions

Maastricht Inflation Criterion

Benefits of Euro Adoption

Financial Stability Issue

At least we cannot have exchange rate and B-o-P crises