Katowice 2 June 2010

Euro in Slovakia 1st Year With the Common Currency And Its First Effects

Igor Barát Member of the Board, Poštová banka, Bratislava

Plenipotentiary of the Slovak Governement for the Introduction of the Euro (2007-2009)

Katowice 2 June 2010

2

January 2009: Slovaks with the new currency

General atmosphere calm and positive High level of public awareness Enough cash ATMs, POS operational No technical or organisational limits Mandatory double pricing Dual circulation till 16 January Extended hours in banks for cash exchange

•Technically: •Macro impact:

Price increase by • 0,12 – 0,19 % (NBS) • 0,24% (MoF)

Less than Malta, Cyprus, Slovenia (0,3 %)

Unjustified jumps in prices not registered

Some insignificant cases found in restaurants, hotels, cafés, services

3

External Factors Dominated in Early 2009

Gas Crises in January – (dramatic drop in RU gas supply)

-80% of industry stopped or significantly limited production-Most of the economy in crises and emergency regime

Outburst of the global financial and economic crises

-Drop in foreign demand-Depreciation of CZK, PLN, HUF up to 30% to the Euro-„Shopping tourism“ of Slovaks -Decrease in passive tourism

Difficult to abstract the immediate impact of the euro from other factors

GDP -4,7%

4

Maastricht Criteria

Criterion

March 2008 ref. value2008 (now)

April 2010

inflation (average HICP, %) 2,2 3,2 (0,9) 0,3

interest rates (%) 4,5 6,5 (6,2) 4,5

public debt (% GDP) 29,4 60,0 35,7

public deficit (% GDP) 2,2 3,0 6,8

Exchange Rate Stability ERM II since Nov. 05

Source: Eurostat, European Commission, MF SR, NBS

5

Inflation remains among the lowests

6

-6-5-4-3-2-10123456789

101112

2005 2006 2007 2008 2009

Slovakia

Germany

Czech Republic

EU 27

GDP Growth

7

Benefits of the Euro Adoption

Direct (immediate) benefits

•Exchange rate stability/elimination of exchange rate risk•lower costs of capital•elimination of some transaction costs•higher price transparency•Higher comfort for people abroad•Psychological aspects

Indirect (long-term) benefits

•trade growth•increase of FDI•faster growth/increase of living standards/progress in real convergence

8

The introduction of the euro is/was...

10% 8% 7% 10% 10% 15%20% 24%

31%

39%35% 36%

39% 38%

43%

51%50%

47%

32%38%

27%

34%30%

25%

19% 16%15%11% 14%

15%

11%14%

10%3% 5% 4%8% 5%

15%6% 8% 7% 7% 5% 3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

4/2007 11/2007 2/2008 5/2008 7/2008 11/2008 1/2009 3/2009 X.09

NK/NA

Definitely baddecision

Rather baddecision

Rather gooddecision

Definitely gooddecision

Focus Agency, SK

9

Slovakia Has The Best Rating In The Region

Standard & Poor’s

Moody’s Fitch Rating JCR R&I

Slovakia

A+stabilný výhľad

A1stabilný výhľad



Astabilný výhľad

Czech Republic

Astabilný výhľad



Astabilný výhľad

Astabilný výhľad

Poland

A-stabilný výhľad





Hungary

BBB-negatívny výhľad

Baa1negatívny výhľad

BBBnegatívny výhľad

BBB+stabilný výhľad

BBBstabilný výhľad

10

Medium-Term Outlook for Slovakia is more optimistic

Source: Consensus Economics.

11

Thanks for Your Kind Attention

Igor Barát

Member of the Board of DirectorsPoštová banka, a.s. [email protected]

12

long-run GDP increase by 7-20 %

0 0,1 0,2 0,3 0,4

costs

benefits

(% HDP)

financialtransaction costs

asministrativetransaction costs

exchange rate risks

currencyconversion costs*

loss of independentmonetary policy

Benefits vs. Costs

13

Fiscal Deficit

14

Fiscal Deficit

15

ERM II Exchange Rate Development

Nov 2005 ERM II entry 38,4550 SKK/EUR

Mar 2007 1. revaluation 35,4424 -7,83%

May 2008 2. revaluation 30,1260 -21,66%

July 2008 conv. rate 30,1260

16

Euro Cash Frontloading

Banknotes188 million ( 7 b. €) obtained thru ESCB/OeNB Vienna51 million (950 mil €) subfrontloaded to banks

Coins499 million (150 mil. €)Minted in Kremnica Mint, Slovakia283 million (98 mil €) subfrontloaded to banks

Starter Kits for households and SMEsSet 45 coins worth 16,60 € (500 SKK)1,32 mil produced and sold

17

Information campaign

In cooperation with professional agency: Creo/Young & Rubicam

Information campaign for general public started in January 2008

Lasted till end February 2009

Partners: EC, ECB, OeNB, domestic institutions

NBSGovernmentEuropean Commission

Domestic sources 6,2 m EUREuropean Commission 1,8 m EUR Total costs 7,9 m EUR

47%

31%22%

18

Euro myths and fears

„Euro = „teuro“ = price jumps“

„Euro helps businesses, not ordinary people“

„We´ll face psycho shock“

„We´ll need pouches“ (europurses)

„Seniors will face serious problems“

„We´ll become poorest euro nation“

„Neighbours are smarter – they wait“

19

Published

•Daily newspapers (paid)•Leaflets•NBS website•Partner websites•Media support

Voting options

•Phone call (paid)•SMS (paid)•Internet (free)

RESULT:Over 140.000 votes

20

90899188908787868679

70

39

3337

35

9107119111212

1220

28

5451

42

45

01020

3040506070

8090

100

enough not enough

Do you have enough information about the euro changeover (Slovak Stat´s)?

Saturation with information

21

2730 29 31 28

37 3538

43 41 40

29

45 42

5154

3331

27 26 28 26

0

10

20

30

40

50

60

X.200

4

V.200

6

XI.200

6

V.200

7

V.200

8

20.6

.200

8

21.7

.200

8

22.8

.200

8

24.9

.200

8

21.1

0.20

08

14.1

1.20

08

benefit disadvantage

What will euro mean for you, personally? (Slovak Stat´s)

Public opinion on the euro

22

Hurdles and troubles

Everybody needs more money, staff...Public procurement process Short time for minting, sub/frontloadingSlow legislation – amendments, modifications, exceptionsPublic sector is always slower Public myths to be fighted („teuro“, coins....)Always possible to find arguments against

Good Reasons

Documents

Katowice 2 June 2010