- Reuters
- , Wednesday May 28 2008
(Adds details, background)
By Marcin Grajewski
BRUSSELS, May 28 (Reuters) - Slovakia revalued its crown currency against the euro on Wednesday, ahead of its entry into the euro zone, the European Commission said.
The crown's central parity in the exchange rate mechanism ERM-2, a precursor to euro adoption, has been revalued by 17.6472 percent to 30.1260 against the euro, the European Union executive said in a statement.
In the ERM-2, the crown is allowed to move within a band of plus/minus 15 percent around the central rate. It traded at 30.52 late on Wednesday, according to Reuters' data.
"The revaluation of the central rate of the Slovak koruna is justified by ongoing improvements in underlying fundamentals. It will support the authorities in maintaining macroeconomic stability," the European Union executive said.
The revaluation followed the Commission's recommendation to permit Slovakia to join the euro zone on Jan. 1, 2009. EU finance ministers are expected to clear the decision next Tuesday.
The Commission said the move, which followed firming of the crown in the last year, is justified by Slovakia's economic fundamentals and will support the authorities in maintaining macroeconomic stability.
"The revaluation is based on a firm commitment by the authorities to pursue appropriate supportive policies, aimed in particular at maintaining price stability in a sustainable manner, underpinning external competitiveness and strengthening economic resilience," it said.
Euro zone countries, the European Central Bank (ECB) and other countries also in ERM II had agreed to this request by Slovakia, the statement added.
Financial markets have expected the revaluation to take place as a tool to help the government fight inflation, which had been the main obstacle on Slovakia's path to the euro zone.
EU finance ministers will set the crown's final exchange rate against the euro in early July.
Greece also revalued its drachma peg ahead of its euro zone entry in 2001.
A ministers' draft decision showed that EU finance ministers will next week let Slovakia join the euro zone as expected and urge the country to follow sound fiscal policies.
Slovakia is thus set to become the 16th member of the euro zone and the fourth of the bloc's new members that joined the EU since 2004 to adopt the euro.
Much smaller Slovenia entered the single currency zone in 2007, followed by Cyprus and Malta this year. (Editing by Elizabeth Piper)
