Enlargement, 3 years after
European Commission - Enlargement - Enlargement, 3 years after - Another star for the EURO
Another star for the EURO: Slovenia becomes the first of the new Member States to adopt the EU's common currency.
On 1st January 2007, only two and a half years after joining the European Union on 1 May 2004, Slovenia became the 13th EU country and the first of the new Member States to adopt the Euro.
This milestone marked the culmination of an economic transformation that began with Slovenia’s independence from Yugoslavia in 1991, after which the country gradually managed to consolidate a functioning market economy, achieve robust growth, reduce its public debt and trade-balance deficit, while gradually lowering inflation to Euro-area levels.
At the end of 2005, long-term interest rates, the fiscal deficit, the public- debt ratio and inflation were within the limits required under the Maastricht Treaty. Everything was set for the process of Euro adoption to begin.
The cost of the Euro changeover is estimated at 1 billion, but is expected to pay dividends many times greater. Slovenia is a small country with a competitive market economy. More than 70% of its international trade is with partners in the EU, and the largest proportion of this is with the Euro-area countries. Over half of all Slovenian trade is with Austria, France, Germany and Italy. In 2004, almost 20% of all goods imported by Slovenia came from Germany alone.
The benefits of having the Euro therefore relate mostly to lowering transaction costs in trade, which will continue to fuel activity and promote capital flows. Adoption of the Euro is a sign of economic maturity; it is expected to enhance investment opportunities in Slovenia and increase its attractiveness as a place to do business.
Thanks to the Euro, people in Slovenia now benefit more easily from the advantages of the internal market: greater transparency brings increased competition, which may lead to lower prices. The Euro also ensures easier borrowing in a larger, more liquid, more competitive financial market. Last but not least, the Euro makes travelling much easier.
It's therefore not surprising that all the way through the process, polls showed high levels of public support for the Euro. After its introduction, people still seem very happy with their new currency: a month after the end of the circulation period, 88,6% Slovenians said they had no trouble adjusting to the Euro. Over 85% had no problem saying farewell to the tolar, their currency for 15 years, and almost half of respondents said they trusted the Euro more.
Although 83,4% of respondents said they were experiencing some price increases since the switch to the Euro, according to the February report of the Statistical Office of Slovenia, the introduction of the Euro had no real impact on inflation. On average, prices even fell by 0,7% and the average annual inflation rate remained unchanged at 2,5%.
A key element in the successful introduction of the Euro in Slovenia was the communication campaign, “The Euro – for all of us”, which was run under the Partnership Agreement signed between the Slovene government and the European Commission. The campaign included publications, TV and radio ads, as well as advertisements in cinemas and on the Internet. A toll-free phone number was opened for people seeking answers to their questions about the Euro, as well as for those reporting irregularities.
This historic step was not only a success for Slovenia, but for the EU as a whole. Not only does it make it easier to visit this beautiful Alpine country and enjoy the warm hospitality of its people. It is proof that the efforts of recent arrivals towards economic convergence do pay off – in Euros and cents!