Process of Euro Introduction in Slovakia - nbp.pl · PDF fileProcess of Euro Introduction in...
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Date 10. July 2008
Elena Kohútiková, VUB bank
Process of Euro Introduction in SlovakiaSeminar for the NBP
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Agenda
Preparations for the Euro
Compliance with Maastricht Criteria
Euro Changeover Plan
Information gained from the process
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Agenda
Preparations for the Euro- Political and Macro Backdrop- Common Interest in the Euro- Benefits of Early Euro Adoption
Compliance with Maastricht Criteria
Euro Changeover Plan
Information gained from the process
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2003: Year of Grasped Reform Opportunity
Surprisingly to many observers, pro-reform political forces that over the years 1998-2002 successfully reintegrated Slovakia into the western structures (EU, OECD, NATO) had been confirmed in power in September 2002 parliamentary election
The re-election gave the second government of PM Dzurinda mandate for further reforms and yet closer integration into the EU institutions
The government grasped the opportunity in full and introduced comprehensive structural reforms (described on the following slides) that made Slovakia an economic front-runner in the newly acceding EU member countries
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Tax Reform
Objectives:Reduce work and entrepreneurship disincentives of taxationIncrease the transparency of the tax systemReduce distortions from tax exemptions and double taxation
Means:Introduction of a flat income tax rate of 19% for both personal and corporate income effective January 2004 (previous rates ranged from 10%-38% and 25%, respectively)VAT rates were unified at 19% (from a two rate system of 14% and 20%) and excise taxes raised closer to the levels prevailing in the EUAll tax exemptions and special regimes were abolished, except for deductible allowances for low income earners, which were increased to improve work incentivesGift and inheritance taxes were abolished, dividend tax rate was set to zero
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Pension Reform
Objectives:Enhance viability of the public pay-as-you-go (PAYG) pension schemeEnsure long-term sustainability of the system by adding privately funded scheme
Means:Parametric changes to PAYG, involving increasing the statutory retirement age for both men and women to 62 years from previous 60 and 55 years, respectively.System changes to PAYG, introducing the “merit” principle with benefits made dependent on work and contribution historyIntroduction of the second, privately funded pillar in 2005. Pension contributions, 18% of gross wages, were equally split between the first pillar, PAYG, and the second pillar, run by private asset management companies.
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Social Security Reform
Objectives:Reduce abuse of the welfare system, make it better targetedStimulate work
Means:Benefits cut by half to able-bodied citizens who are voluntarily unemployedRegistration for unemployment benefit was made tighter to exclude employees working in the informal economy. Unemployed had to regularly visit labor offices to claim benefits or risk losing themChild and family benefits distributed partly as tax bonuses to reward earned incomeIncentives provided to unemployed who actively seek job, for example via accommodation payments for those willing to move
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Labor Market Reform
Objectives:Stimulate supply of laborStimulate demand for labor
Means:Cut in social contributions rate by 3 percentage pointsTargeted employment subsidies for job creation in high-unemployment regionsSimplified legal requirements for enterprise registration introduced to encourage self-employment and small scale businesses in job-intensive service activitiesLabor Code approved in July 2003 provided more flexibility for employers by simplifying procedures for hiring and firing (however, modifications prepared by new government valid since September 2007 shifted the balance again towards labor unions and employees).
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Other reforms – planned for 2004 but unfortunatelly not fully implemented
Healthcare reform
Reforms involved mainly measures to prevent further build-up of debt in the heavily indebted Slovak healthcare.
Such measures included, for example, introduction of a fixed payments for drug prescription, and stay in hospital
Education reform
Reform in the sector intended, for example, to motivate municipalities to economize on basic school financing and introduce fees for university education.
Consensus, however, formed very hard, reform was eventually modified
Local Governance
Decentralization. Responsibility for the provision of the main public services was transferred to sub-central governments as of 2003.
Funding set to motivate regions and municipalities to save and improve service
Law Enforcement
The main goal of the reform was to optimize the judiciary system and make the judges’ work more effective
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Thanks to reforms and entry into the EU , economic growth was about to take off, boostingconvergence to EU
012
345678
91011
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
e20
09f
Slovakia EU15
Real GDP growth (%)
EU entry
35
40
45
50
55
60
65
GDP per Capita (PPP) Price Level
% EU15
1997 2000 2003 2006 2008e
Slovakia: convergence
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Price distortions have largely been corrected, inflation was set to decline gradually
Development of inflation in 2000-08 (y/y %)
0
10
20
30
40
50
I-00
VII-0
0
I-01
VII-0
1
I-02
VII-0
2
I-03
VII-0
3
I-04
VII-0
4
I-05
VII-0
5
I-06
VII-0
6
I-07
VII-0
7
I-08
Headline inflation Regulated prices Core inflation
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Fiscal performance was about to improve dramatically...
Fiscal deficit 2000-10 (% of GDP) Public debt 2000-2010 (% of GDP)
-1.0
1.0
3.0
5.0
7.0
9.0
11.0
13.0
2000
2001
2002
2003
2004
2005
2006
F
2007
F
2008
F
2009
F
2010
F
Public finance deficit inc.pension reform costsPublic finance deficit ex.pension reform costsMaastricht criterium
20
25
30
35
40
45
50
55
60
65
2000
2001
2002
2003
2004
2005
2006
F
2007
F
2008
F
2009
F
2010
F
Public debt / GDP (in %)Maastricht fiscal criterium - Public debt
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...all of which boosted interest rate convergence and value of the Slovak koruna
Development of 10 year govtbond yield (2001-2008)
Development of EURSKK (2000-2008)
3.0
4.0
5.0
6.0
7.0
8.0
9.0
I-01 IX-01 V-02 I-03 IX-03 V-04 I-05 IX-05 V-06 I-07 IX-07 V-0830
32
34
36
38
40
42
44
I-00 IX-00 V-01 I-02 IX-02 V-03 I-04 IX-04 V-05 I-06 IX-06 V-07 I-08
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Both the government and the central bank have had a common interest in the Euro...
2003: Strategy of Euro Adoption in the Slovak Republic- A joint conclusion of the government and the central bank that it is
advantageous to adopt the euro as soon as possible after having met the Maastricht criteria in a sustainable way (2008, 2009)
2004: A Detailed Strategy of Euro Adoption- Target date for euro adoption 1.1.2009- Maastricht criteria compliance in 2007- Approved in parliament by votes of both coalition and opposition
2005: National Changeover Plan- Detailed plan of practical steps toward smooth introduction of the
euro currency
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... and concluded that adopting the euro later than 2009 would needlessly deprive the country from the benefits of the single currency
0 0,1 0,2 0,3 0,4
costs
benefits
(% GDP)
financialtransaction costs
administrativetransaction costs
exchange rate risk
cost of currencychangeover
loss ofindependentmonetary policy
Long-term increase of GDP
by 7-20 %
Source: NBS
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Pros and Cons of Euro Adoption summarized
Economic disadvantages:Technical costs of currency
changeoverLoss of independent monetary policySome increase in inflationLoss of fx revenues and temporarily
higher expenses of the banking sector
Economically unfounded fears:Increase of prices because of
changeover / roundingGeneral fears of the future of the
Eurozone
Economic advantages:Elimination of transaction costsElimination of exchange rate risksHigher price transparencyIncrease of foreign tradeHigher attractiveness for FDI inflowAcceleration in economic growth
Non-economic advantages:Higher credibility of Slovakia abroadBetter cooperation on juridical and
police field, environmental and R&D projects
DisadvantagesAdvantages
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To be sure, there were some relevant arguments for delayed Euro adoption…
Insufficient readiness of the economy for the common market, insufficient real convergence, insufficient competitiveness
Insufficient cycle synchronization of the economies of Slovakia and EMU
Insufficient flexibility of the labor market (constrained movement of Slovak employees to some countries of EMU)
Insufficient consolidation of public finance
Incomplete liberalization of some markets
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...yet, in retrospect, the Euro process and associated reforms put them aside
Accelerated real convergence (p. 10)
Improved competitiveness (CGI ranking in 2007: 41 vs 2003: 49)
Improved flexibility of the local labor market
Improved consolidation of public finance (p. 12)
Accelerated liberalization of remaining markets
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Economic Policies Supporting Euro Adoption
Short-Term Target: meeting Maastricht criteria- continue to decrease inflation- decrease public finance deficit- assure stability of the koruna exchange rate (joint task of the central
bank and the government)
Long-Term Target: increasing the flexibility of the economy- structural policies, involving mainly the labor market, plus support of
the growth potential of the economy- Benefits of the euro are not automatic, they will materialize only if
they are accompanied by right policies
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Concluding remarks on € preparation stage
The EURO project has been an integral part of and the driver of reforms
NBS took the initiative of EURO implementation
Consensus in the project was demonstrated by common submission of materials for the approval by the government
Government then submitted materials to the parliament
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Agenda
Preparations for the Euro
Compliance with Maastricht Criteria- Criteria and their pitfalls- Slovakia’s experience with ERMII
Euro Changeover Plan
Information gained from the process
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Maastricht Criteria defined
Public finance:- Fiscal deficit below 3% of GDP- Fiscal debt below 60% of GDP
Inflation: not higher than 1.5ppt above the average of three lowest member states (EU not EMU)
Interest rates: long term interest rates not higher than 2.0ppt above the average of three inflation-lowest member states
Exchange rate stability: stay in ERM II, fluctuation range ±15%, without devaluation of the parity, without significant strains
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Slovakia’s Compliance with Maastricht Criteria Criteria 2003 2004 2005 2006 2007 2008e
Public deficit including pension reform costs (max. 3%)* 2,7 2,4 2,8 3,6 2,2 2,0
Public deficit excluding pension reform costs (max. 3%)* 2,7 2,4 2,2 2,6 0,9 0,8
42,4 41,4 34,1 30,4 29,4 31,0
8,5 7,5 2,8 4,3 1,9 3,2
4,99 5,03 3,52 4,41 4,49
Fiscal criterium (% GDP)
Public debt (max. 60%)
Nominal exchange rate
Inflation (HICP, %)
Long term interest rates (%)
In ERM II since November 28, 2005
Sources: NBS, Ministry of Finance SR, EUROSTAT, NBS and VÚB calculations
*Public deficit for 2005 and 2006 is evaluated without pension reform costs as allowed by transition period set by Eurostat
* Public deficit for 2005 and 2006 includes also pension reform costs
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Pitfalls of the Fiscal Criterion
Counting in the Pension Reform cost
Temporary allowance to treat privately funded pension pillar within public finance
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Pitfalls of the Inflation Criterion
Moving target, we do not know the reference level in advance
Benchmark countries EU not EMU (Poland was Slovakia’sreference country in the period 4/06-4/07; Sweden, another non-euro country almost all our two-and-a-half year ERMII stay)
Potential conflict with the exchange rate criterion
Potential conflict with catching up - price impact of fast economic growth (Balassa-Samuelson effect)
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Pitfalls of the Exchange Rate Criterion
Small open converging economy with floating exchange rate regime!
Currency vulnerable to speculative attacks
Liberalization of capital and financial flows vs. exchange rate stability
Definition of the stability „without significant strains“
Potential conflict with the inflation criterion (impact of the exchange rate pass-through on inflation)
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Pitfalls of the Interest Rate Criterion
Critically dependent on the belief of financial markets in the success of the euro process
If all the other Maastricht criteria are met, interest rate criterion will very likely be met as well
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Pitfalls of Sustainability
How do you define fulfillment of the criteria in a sustainable way? One year prior to the euro entry, two years, or ?
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Benefits and Challenges of ERMII
ties hands of local monetary policy (inflation targeting within ERMII)
fiscal policy must support disinflation in the economy
need to continue with structural reforms, increase flexibility of the economy
more flexible labor market = wage discipline
Disciplining tool for government and monetary policies
Signifies clear commitment of both the government and the central bank to adopt the euro
ChallengesBenefits
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Slovakia’s entry into the ERMII
November 28, 2005, 08:00 a.m. The central parity of the koruna set at 38,4550 vs the euro (the spot rate cob Friday Nov 25)The fluctuation range ±15 % around the central parityNo unilateral commitments of the government and the NBS in the area of exchange rate regime
37,2
37,6
38,0
38,4
38,8
39,2
27.10.2005 4.11.2005 11.11.2005 21.11.2005 28.11.2005 5.12.2005
spot30-day average
ERM II entry
Koruna exchange rate 1-month ahead of ERMI entry
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Experience with the stay in the ERMII (1/2)
1st revaluation of the central parity in March 2007- Shift of the parity by 8,5%, realigning with the growth
outperformance of the Slovak economy vis-a-vis EMU since the entry into the ERMI
- Parity set weaker than current market spot, in line with the perceived equilibrium level
- Market reacted dramatically, but in the direction of further appreciation, rather than depreciating toward the new parity
- That is, market participants did not view the new parity as credible to sustain
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Experience with the stay in the ERMII (2/2)
2nd revaluation of the central parity in May 2008- Shift of the parity by 15,0% (the strongest bound of the previous
fluctuation band) to allow for the future growth outperformance- Parity was set stronger than current market spot, actually stronger
than market ever reached- Market reacted with move toward and stabilization around the
new parity- That is, market participants accepted the new parity as the future
level of the fixed conversion rate
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Koruna exchange rate during ERMII stay
25.0
27.0
29.0
31.0
33.0
35.0
37.0
39.0
I-05 V-05 IX-05 I-06 V-06 IX-06 I-07 V-07 IX-07 I-08 V-08
ERM II entry: Nov 25, 2005EUR/SKKParity set on ERM II entry - 38.455 EUR/SKK1st revaluation of parity - 35.442 EUR/SKK2nd revaluation of parity - 30.126 EUR/SKKRange ± 2.25% from actual parityRange ± 15% from actual parity
1st revaluation & parity
2nd revaluation & parity
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Concluding remarks on ERMII stage
Slovakia has been a pioneer in number of dimensions:- small open converging economy - floating exchange rate regime- two revaluations of the central parity
ERMII proved a great disciplining tool on politicians, guarantor of continuity of sound economic policies
Maastricht criteria are ill-defined for converging economies, would be beneficial for the next euro adopters if at least some of themost open pitfalls are corrected, especially the inflation criterium
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Conclusion – What Have We Learned
Start early- Strategic thinking and decisions 6 years in advance- Operational and organizational preparations 3 years in advance
Cooperation of the government and the central bank at all managerial levels during all stages of the process
Importance of communication- Government- Central bank- Businesses- Public
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Agenda
Preparations for the Euro
Compliance with Maastricht Criteria
Euro Changeover Plan
Information gained from the process
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Euro Changeover Plan:A. Basic principlesB. Main FactorsC. Slovak notes and coins
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Euro Changeover Plan
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Euro Changeover Plan
July 2005 – Euro Changeover Plan Adoption
November 2005 – entry into the ERM II
December 2005 – an anonymous public tender for the design of national sides of Slovak euro coins
January 2006 – Euro Plenipotentiary of the Government (initially I. Štefanec – since February 2007 I. Barát)
January 2008 – passing of the Euro Introduction Act in the Slovak Republic (so-called Umbrella law)
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Euro Changeover PlanApril 2006 – March 2008 Sustainable fulfilment of the Maastricht criteria
May 2008 – Convergence reports by the ECB and the EC and proposals concerning Slovakia´s ability to adopt €
28th of May 2008 - new central parity 30,1260 SKK/ EUR (SR the 1st country, where the central parity was set twice)
17th of June 2008 – Consultation with the European Parliament19th of July 2008- Leaders of the European Union recomended the entry of Slovakia to the eurozone8th of July 2008 – The Council of the EU cancelled the exception and set a conversion rate at the level of: 30,1260 SKK/ EUR
1st of January 2009 – Introduction of the euro - day €
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Euro Changeover PlanPrinciple of not harming the citizen– the introduction of euro must notnegatively harm citizens and consumers
Principle of price neutrality - € must not be abused for increasing prices without any reason, every merchant, who will abuse the introduction of euro for increasing the prices will be penalized
Principle of the continuity of contracts – the introduction of euro will have no consequences for existing contracts, these will be valid as they were signed. If a component of the contract is in Slovak koruna, this will be converted on the 1st of January 2009 to euro by the conversion rate and contract conditions will stay the same, but executions will be in euro.
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A. Basic principlesPrinciple of not harming the citizen
- The euro introduction must not harm citizens or consumers- Fees and taxes, if not precisely converted according to rounding rules,
should be rounded down,- payments to citizens should be rounded up- more precise rounding off some prices– for example unit prices- at least
by 1 decimal number more than other prices, minimum 3- prices of water, energy, electric services- rounding off at least on 4
decimal numbers- these are small sums- more precise rounding off protects consumers
- preclusion of increasing prices– Ethical code– enterprises committed themselves that they will not abuse the introduction of € for increasing prices
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A. Basic principlesPrinciple of price neutrality
- Prices converted from SKK to € will be calculated only by conversion rate in an unshortened form :
1€ = 30,1260 SKK
- Rounding off the prices by determined rules- on two decimal numbers-up to 5 towards down and 5 and over 5 towards up
- Rounded off will be the final value, not partials items, so for instance value of the whole purchase, not individual goods
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A. Basic principlesPrinciple of the continuity of contracts
- The euro introduction can not influence the continuity of contracts and other legal instruments.
- All contracts containing references to the Slovak koruna will remain valid after the euro changeover
- It will not be possible to terminate any contract due to the eurochangeover
- The euro changeover will not influence the nominal interest rate payable by the debtor in the case of instruments with a fixed interest rate
- At the same time, however, the principle of the freedom of contract will be preserved; contracting parties may, by bilateral agreement, change their agreement following the euro changeover in any way
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B. Main factors 1. Big-bang or Madrid scenario BIG BANG!
WHY?a) € is a well-known and the most used
currency in foreign trade b) Slovakia is a small economyc) Lower costsd) Lower risk
The only one official currency will be from the first minute of 2009 EURO – (Euro will be introduced at the same time in both cash and non-cash form)In the countries of Eurozone, coins with Slovak national symbols will be valid and in Slovakia will be valid coins with national symbols of the 15 Euorzone countries
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B. Main factors2. Conversion rate
Set by the Council of the European Union on the 8th of July 2008Is determined as a number with 6 digits, 2 before decimal point and 4 after the decimal point
1 € = 30,1260 SKKConversion rate must not be rounded off!!!This rate will be used until the end of 2008 only for the purposes of dual displaying of prices, preparation and testing of the conversion,preparation of recalculation of property and securities, in practise the rate will be used for the first time on the 1st of January 2009
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B. Main factors3. Rouding off
Only a sum already converted by the conversion rate can be rounded offRounding off should be done on the nearest cent, unless not specified by the law Rounding off will be executed according to mathematical principles
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B. Main factors
4. Dual pricing – main principles are included in the Umbrella law
- From the 8th of August 2008 (one month after the setting of the conversion rate) until the 31st of December 2009
- Displaying of sums in SKK and simultaneously in € ( until the 31st of December 2008 is the main currency SKK and € serves only for information purposes, from the 1st of January 2009 is the main currency €) together with conversion rate
- Valid in relation to citizen - not compulsory between business subjects- On price tags must be a sum in SKK, € and conversion rate- exceptions are determinated by the regulation of the Slovak Ministry of
Economy- for example for entrepreneurs with 5 and less than 5 employees, for sales of unstable foodstuffs, for price tags directly on goods, specifications also for internet sales...
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B. Main factors
5. Dual circulation
Will last only until the 16th of January 2009 for citizens and until the 19th for entrepreneursDuring the time of dual circulation citizens can also pay by Slovak koruna, but entrepreneurs can only give them back eurowith the exception, when a customer agrees with taking back the overpayment in other form than euroAfter the termination of the dual circulation it will be possible to pay only in euroMerchants have to prepare themselves for the dual circulation at both the organisational and technical level (two currencies)
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B. Main factors
Withdrawal of Slovak notes and coins from the circulationNotes – after the termination of the dual circulation without any charge until the 31st of December 2009 in commercial banks and NBS-conversion to euro will be always executed in line with the conversion rate From the 1st of January 2010 for an unlimited period of time in NBS forfree of charge, always will be used the same conversion rate as on the 1st of January 2009 and this conversion will be always without any charge Coins – until the 30th of June 2009 in commercial banks and NBS under the same conditions as with notes From the 1st of July 2009 to 31st of December 2013 in the NBSCommemorative Slovak coins-without a time limit (same as notes)
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B. Main factors - CommunicationTarget groups:
entrepreneurs – government does not have a special communication strategy, information from banks, association and suppliers of softwersemployees – information from employersOther citizens – especially children, retired persons, endangered groups, disabled, ethnic minorities
Communication is conducted on 3 levels:
• Government, NBS and other central institutions
• Associations – including Slovak banking association
• On the level of individual entrepreneurial subjects- VUB has been implementing during the whole process its communication activities-what is also a part of a competition in the field
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B. Main factors - CommunicationEuro Plan:
Plan of the conversion consisting of three milestones– dual displaying – an estimation of the date of implementation August 2008, a plan of conversion – the 1st of January 2009 and a plan of accounts– the 31st of January 2009Communication plan – in the framework of euro project, inside the company, in relation to public (suppliers, customers, bank), in relation to media and owner of the companyEducational plan for employees – about the euro conversion in general, about the conversion in the company, about changing practices in the day-to-day work in accountancy and in the area dealing with cashPlan of frontloading and sub-frontloadingBCP – so-called risk scenarios– currently underestimated area not only in the business sector Commercial Plan
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B. Main factors - CommunicationEuro committee:
A sponsor of the Euro committee should be a member of the company leadership (management board), responsible for practical managing of project- not an IT manager- those businessMembers of the Euro committee should be the leading managersresponsible for individual sectors, which deal with euro- for example area of accountancy, financial activities, information systems, HR director etc. At least once per month should report the management board about the preparations for euroRegularly report the supervisory board
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Curbing fears from inflation growth
Consumer protection principles
Dual display of prices
Conversion rate, rounding rules
Banknote and coins designs, security features
Cash exchange modalities
Other sources of information
B. Main factors - Communication
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National Coordination Committee - the supreme managing and coordination body - chairman – the Minister of Finance, also as the National Coordinator for Euro Changeover in the SR, deputy chairman – NBS Governor, Deputy Prime Minister for a Knowledge-Based Society, European Affairs, Human Rights and Minorities, Minister of Justice, Minister of Interior ...
Plenipotentiary of the Government of the Slovak Republic for theintroduction of €Working committees - for Banks and the Financial Sector, for General Government , Non-financial Sector and Consumer Protection, for Legislation, for Communication
Working groups in every organization - The National Coordinator recommends that self-governing regions, towns, municipalities,all businesses and organizations establish working groups for euro changeover
B. Main factors- Institutional provision for the euro changeover
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B. Main Factors- Legislation1.Umbrella law – directs the process of € introduction:
edits: dual pricing
sanctions
institutions of supervision
conversion
Control and supervision over dual displaying and prices – it wasnecessary to amend 25 legal norms (commercial code, labour code...)
Regulations of individual ministries– specifying details of rounding off the sums and dual displaying of prices in individual sectors
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B. Main Factors- Legislation
2. set of laws - laws, which must enter into force by the 1st of January 2009 such as Commercial code or Labour code 2009
3. set of laws – laws, which will be gradually amended after the 1st of January 2009
A list of legal norms, which will be influenced by the introduction of euro and their amendment was approved by the government on the 21st of December 2005 – 3 years before €
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B. Main Factors- LegislationLate enacting of legislative norms
1.1.2008 the so-called Umbrella law went into force1.3.2008 Regulation of the Ministry of Finance of the SR27.3.2008 Regulation of the Ministry of Economy of the SR1.7.2008 Regulation of the National Bank of Slovakia (should have been valid from 1.3.2008)1.7.2008 Regulation of the National Bank of Slovakia (shares)4.7.2008 Regulation of the Ministry of Labour, social affairs and FamilyOther regulations are still not approved– particularly entrepreneurs do not have adequate amount of information, crucial for the firms’preparation for the introduction of euro
It is necessary to bear mind that the process could be longer due to the consultation with the ECB!
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B. Factors- Frontloading and sub-frontloading
frontloading – from NBS to commercial banks
sub-frontloading – from commercial banks to commercial subjects such as post, wholesale, retail, providers of services, providers of organizations working with cashsub-frontloading will be offered by banks to clients free of charge and with conversion ratesub-frontloaded euro cash: euro notes and Slovak euro coins- cannot be released into the circulation before the 1st of January the whole process of frontloading is free of charge!
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B. Main Factors- Sub - frontloadingreal process of sub-frontloading takes at least 4 months
Approaching banks´ clients at least 1,5 year before the euro introduction
multiple approaching of clients- in the past, the clients´ reactions were very unenthusiastic- approximately only 10 – 15% of potential clients responded in the first round
press conferences, direct mails, briefings, calls, personal meetings with large clientsIrreplaceable function of commercial banks
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C. Slovak euro coinsJuly 2004 - NBS announced a public tender for art proposals for Slovak sides of euro coins
In total there were 658 proposals in the first round10 proposals were shorlisted and 3 out of these shorltlisted proposals were chosen by the citizens of the SR (140 000 persons participated in the public inquiry)
winning proposals – Slovak motives: double cross, Bratislava castle and a peak Kriváň
Every coin has different size and weight, only 1,2 and 5 cents coins have the same thickness
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C. Slovak euro coins
2€ 1€
50, 20, 10 c 5, 2, 1c
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Agenda
Preparations for the Euro
Compliance with Maastricht Criteria
Euro Changeover Plan
Information gained from the process
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Information gained from the process
preparation of business sector population
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Preparation for € in business sphere
69 % of businesses assume that their costs spent on the introduction of euro will not exceed 16 597 €15 % of companies assume that these processes will not cost more than 33 194 €16 % of companies is expecting the costs to be over 33 194 €
Zdroj: Prieskum TNS 2007
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Preparation for € in business sphereMajority of businesses does not expect problems with the introduction of euroConversion of accountancy and adjustment of information systems are considered by big businesses as the most challenging tasksFor small and medium sized business the most difficult task is the conversion of prices and dual displaying of prices
Experience from Slovenia has shown that for companies with 50 and up to 500 employees is in average desirable to devote for the euro adoption
between 6 and 9 monthsSource: TNS 2007
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Source: NBS 2007
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
% respondents
conversion of accountancy
information systems
dual displaying
determination of prices
cash circulation
Expected problematic areas- big businesses
yes rather yes rather no no do not know
Problematic areas for big businesses
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Problematic areas for small and mediumsized businesses
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
% respondents
determination of prices
dual displaying
conversion of accountancy
cash circulation
information systems
Expected problematic areas- Small and medium sized business
yes rather yes rather no no do not knowSource: NBS 2007
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All must pay for the costs of introducing € by themselves
banking sector – large banks 20 – 30 mil. EURbusiness sector – in general costs are 0,1 – 0,3 % of GDPIn the case of small businesses and sole traders the costs are estimated approximately from 40 000 to 50 000 Sk
Indirect costs:Banking sector – decreased profit
(particularly from the view of sales, trading, system of payments...)
Costs of Euro Adoption
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Preparations for € - citizens
Experience from different countries influenced stance of the citizens to €:
- Expecting increased rise of prices- € was perceived more skeptical - Depression from low wages- Illusion from low prices (only tenths of original sums)
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15,3%
34,3%39,1%
11,3%
Rather beneficial
Definitely beneficial
Definitely disadvantageous
Rather disadvantageous
Do you consider the adoption of euro to bebeneficial?
Alli 15 +
Source: research GfK agency SR 2008
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3,3%
16,8%
15,6%
24,7%
39,7%
Will you miss the Slovak crowns?
rather yes
definitely yes
definitely no
rather not
Do not know
All 15 +
Source: research GfK agency 2008
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11,4
12,1
1,2
2,4
2,5
2,5
2,8
6,3
6,7
7,2
23,2
23,8
35,8
0% 10% 20% 30% 40%
no need to exchange money
uniform currency for Europe
simpler travelling
simpler payments abroad
advantages for economy, commerce
stability of currency, inflation
no need to count rates
simpler labour abroad
no specific benefits
time will show
benefits for young people
different benefits
do not know
Benefits of adopting euro
Base: respondents, who consider adoption of euro as beneficial (252)
Source: research GfK agency 2008
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8,0
10,7
2,1
2,1
2,4
2,4
3,2
4,1
4,9
6,1
8,2
9,0
23,1
35,4
0% 10% 20% 30% 40%
higher prices, inflation
low wages and pensions
too many coins, carrying a money bag
difficult orientation
problems with conversion of crowds to euro
inequality between Slovakia and Western states
low prices in comparison with crowd
unpreparedness of Slovak economy
too early
loss of Slovak crowd, Slovak identity
bad experience from countries, which alreadyadopted euro
worsening of life standard- more expensive dailybread
different disadvantages
do not know
Disadvantages of adopting euro
Base: respondents, who consider adoption of euro as beneficial (248)
Source: research GfK agency 2008
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1,8%
20,0%
19,6%58,6%
Base: respondents, who consider adoption of euro as beneficial 500 in age 18 and more
I have already held euronotes/coins
I have already paid byeuro
I have never seen euro
I have already seen euronotes/coins
Contact with Euro currency
All 15 +
Source: research GfK agency 2008
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With 2,1% more than twice as high as last yearFuel heats up inflation
(Kronen Zeitung)
Austrians bemoanloss of Schilling
(Kurier,)
Discussion about price increasestarnishes Euro‘s birthday
(Kurier)
Euro makes even hair-cuts more expensive (Kronen Zeitung)
Often applied trick:Less content, same price
(Kronen Zeitung)
Euro = Teuro? Many goods up to 30% more expensive
(Die Presse)
The Euro in Austria
Source: GfK agency 4. 2008
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I am spending more48%
I am spending as much as before
38%
I am spending rather less
14%
71
57
20
12
5
prices have clearlyincreased
prices seem to be lower
living conditions havechanged
salaries have decreased
salaries have increased
39
35
21
4
1
salaries seem to be low
living conditions havechanged
salaries have decreased
salaries have increased
prices have fallen
The Euro in Austria
Source: GfK Austria Eurobarometer (in %)
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ConclusionExperience:
The base is soon preparation of legislation- it must be borne in mind that it is also considered by the EC and the ECB
Communication in relation also towards business sphere
Active work with citizens, active communication towards citizens will start later
Despite long-term and quite expensive preparation it is possible that the process of the euro adoption will be not finished with a positive outcome from the EC and the ECB. The first information about the expected result of the process can be available at the end of April from the Convergention reports. Final approval half a year before expected euro day. If negative – wasted costs
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Thank you for your attention !
www.euroservis.sk