1. 4. 2009 vilnius euro introduction in slovakia martin Šuster director of research department
TRANSCRIPT
1. 4. 20091. 4. 2009
VilniusVilnius
Euro Introduction in SlovakiaEuro Introduction in Slovakia
Martin ŠusterDirector of Research Department
2
Presentation OutlinePresentation Outline Plans and decisions Technical preparations Changeover
3
Plans and decisionsPlans and decisions
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Importance of Euro for SlovakiaImportance of Euro for Slovakia
Main reference currency 3/4 foreign exchange reserves All foreign exchange interventions 98% of spot foreign exchange trades Share of foreign trade in € increases
(expected to reach 90% after euro adoption)
5
Most of theMost of the Trade is in Trade is in €€
Non-€ EU24%
Non-EU Europe
6%
€-area63%
Other countries
7%
% Export (2007) Source: ŠÚ SR.
6
Benefits Exceed CostsBenefits Exceed Costs
long-run GDP increase by 7-20 %
0 0,1 0,2 0,3 0,4
costs
benefits
(% GDP)
financialtransaction costs
administrativetransaction costs
exchange raterisks
currencyconversion costs*
loss ofindependentmonetary policy
* for comparability with permanent effects the one-off conversion costs are split to 5 annual installments Source: NBS.
7
PreparationPreparationss started before the EU entry started before the EU entry
2003: Strategy of euro adoption in SR it is beneficial to adopt euro as early as Maastricht
criteria will be fulfilled (2008-2009) it is necessary to implement fundamental reforms
(particularly public finance consolidation) to minimize inflationary pressure, the period of
price deregulation shouldn't t take long
8
Consistent PlansConsistent Plans Euro adoption strategy in 2003 – set target for
euro area entry in 2008 or 2009 Specification of euro adoption strategy in 2004 – €
target set in 2009 National euro changeover plan approved in 2005 New government in 2006 confirmed plans to
adopt euro in 2009 Updated Changeover plans
Euro adoption had broad political support in Slovakia
9
Main Indicators at the DecisionMain Indicators at the Decision
Deficit in 2002 was over 8% of GDP Inflation was fluctuating between 8% to 10% Increases in VAT, excise taxes and regulated
prices were in the pipeline GDP growth in 2002 below 5% Unemployment exceeded 17% OCA criteria???
10
Monetary Policy AdjustmentsMonetary Policy Adjustments 2004 decision: from implicit towards explicit
inflation targetingInflation targeting within ERM II What were/are the puzzles?
Assessment of exchange rate development with respect to Maastricht criteria fulfilment: close to parity – what does it exactly mean?
How to cope with appreciation trend, when to intervene, how to communicate exchange rate developments (in fact when to maintain silent), is it necessary to consider exchange rate while deciding about interest rates?
11
Public Finance ReformPublic Finance Reform Introduction of programme budgeting
(3 years ahead) Creation of State Treasury and Agency for Debt
and Liquidity Management Fiscal decentralization – delegation of
responsibilities and their financing to local government 93.5% of PIT revenues addressed to local governments disadvantage: extra PIT revenues cannot be used for additional fiscal
consolidation
12
Tax system reform– flat tax, very simple system Pension reform – 2nd and 3rd capital pillars Price deregulations – major adjustment of relative
prices Social, healthcare and education system adjustments
Main Structural ReformsMain Structural Reforms
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ERM II Entry 28. 11. 2005
Request for Euro area entry 5. 4. 2008
Convergence reports of EC and ECB, EC recommendation to the Council on abrogation of derogation
7. 5. 2008
Abrogation of excessive deficit procedure 3. 6. 2008
Council abrogates derogation and sets conversion rate 8. 7. 2008
Euro adoptionEuro adoption 1.1. 1.1. 20092009
CrucialCrucial decisionsdecisions
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CriterionMarch 2008
Reference value
State of Fulfillment
Inflation (average, %) 2.2 3.2 Interest rates (%) 4.5 6.5 Public debt (% GDP) 29.4* 60.0 Public deficit (% GDP) 2.2* 3.0 ER stability ERM II since Nov. 2005 * Year 2007
Maastricht Criteria were Met Maastricht Criteria were Met with a Sufficient Marginwith a Sufficient Margin
Source: Eurostat, European Commission, MF SR, NBS.
15
1.0
2.0
3.0
4.0
5.0
6.0
7.0
III.
05
V.0
5
VII
.05
IX.0
5
XI.
05
I.06
III.
06
V.0
6
VII
.06
IX.0
6
XI.
06
I.07
III.
07
V.0
7
VII
.07
IX.0
7
XI.
07
I.08
III.
08
V.0
8
VII
.08
IX.0
8
XI.
08
I.09
%
Reference value HICP inflation in SKK (12-month average)
Development of Reference Value Development of Reference Value and Inflation in Slovakiaand Inflation in Slovakia
Source: Eurostat.
1 p.p.
16
„The European Union's finance ministers adopted the legal acts necessary for Slovakia to adopt the euro on 1 January 2009. Based on a Commission proposal, they also decided that the Slovak koruna will be replaced by the euro at the rate of 30.1260 SKK to the euro.“
Slovakia – 16th Country of the Euro AreaSlovakia – 16th Country of the Euro Area
„(8 July 2008) Economic and Financial Affairs Council (ECOFIN) adopted final and formal decision allowing Slovakia to adopt the euro as from 1 January 2009.“
Source: press releases of EC and NBS, 8 July 2008.
1€ = 30.1260 Sk
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Euro brings stability Euro brings stability a stable currency increases overall economic stability and generates
favorable conditions for long-term business decisions
85
90
95
100
105
110
115
120
125
130
I.0
8
II.0
8
III.
08
IV.0
8
V.0
8
VI.
08
VII
.08
VII
I.0
8
IX.0
8
X.0
8
XI.
08
XII
.08
I.0
9
II.0
9
III.
09
Ind
ex (
I.20
08=
100)
SKK CZK HUF PLN RONSource: ECB.
App
reci
atio
n of
the
curr
ency
Dep
reci
atio
n o
f th
e cu
rren
cy
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Technical PreparationsTechnical Preparations
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Big-bang Short dual circulation (16 days) Only the conversion rate set by the Council can be
used Continuity of contracts No harm to the citizen Prevent unjustified price increases and perceived
inflation Changeover cost minimization Everyone covers the conversion costs him/herself
Principles of Euro ConversionPrinciples of Euro Conversion
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National Euro Changeover PlanNational Euro Changeover Plan Detailed organizational steps,
responsibilities, deadlines Open document – tasks can be changed or
amended – updated annually 4 sectors + 2 cross-section areas
financial sector, public administration, businesses, legislation
information and statistical systems, communication
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National Coordinator (Ministry of Finance)
Working CommitteesBanks and financial Public administration and sector local governments
Information systems Business sector and consumer and statistics protection
Legislation Communication
National Coordinating Committee
gvt. plenipotentiary
Institutional Framework of Institutional Framework of €€ Introduction Introduction
22
Frontloading of euro cashFrontloading of euro cash
Businesses ATMs
Commercial banks
NBS
Frontloading
Sub-frontloading
23
Sub-frontloadingSub-frontloading Sub-frontloading started on October 28, 2008 and
finished on December 31, 2008. About 14 000 subjects participated in sub-
frontloading. In total 14.3 mil. euro banknotes worth € 225 mil.
and 195 mil. euro coins worth over € 66 mil. were distributed.
1/4 of frontloaded euro banknotes and 2/3 of coins were used in sub-frontloading.
24
Consumer Protection SystemConsumer Protection System Consumer awareness
(following dual price tags and warn of price increases)
Dispute resolution (Black list) Control of consumer protection
associations Control (SOI, ŠÚ SR, ...) Monitoring of selected prices
by ŠÚ SR on 2nd and 5th January 2009 and every 10 days
Market competition Dual display of prices Rounding Rules Free cash exchange (up to at
least 100 pieces) State rounding in favor of
citizens Voluntary obligations of
enterprises („Ethical Code“, Declaration of Common Agreement to Adopt and Use Euro)
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Ethical codeEthical code Main commitment: euro will not rise prices Calls on enterprises to join – radio, prints,
internet 3000 members Over 20 000
shops
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Preparationstill June 2007
Starttill July 2008
Intensive campaignJuly 2008 – 1.1.2009
Finish – year 2009
CommunicationCommunication
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ObjectivesObjectives Everybody should be informed
(in appropriate form and extent) Informative and educational campaign,
not persuasive Practical, Simple Main target group: General Public
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Main MessagesMain Messages Conversion rate and the value of the euro Key dates Dual circulation Dual display of prices and consumer protection Price abuse prevention Banknotes and coins, security features EMU, ECB …
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Target GroupsTarget Groups General Public Children Youth Elderly Blind / Partially sighted Deaf / Hearing impaired Minorities (Hungarian, Roma) SMEs Government / Local governments
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ToolsTools Media – news, reports … mainly public media Advertising in media, outdoor advertising Direct mails Printed materials (leaflets, brochures, posters) Free info line (0800 103 104) Website (www.euromena.sk) Euro day Conferences, seminars, lectures …
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32
33
34
35
36
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ChangeoverChangeover
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New Year / Euro Adoption CelebrationsNew Year / Euro Adoption Celebrations
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0%
20%
40%
60%
80%
100%
120%
21:0
0
21:1
5
21:3
0
21:4
5
22:0
0
22:1
5
22:3
0
22:4
5
23:0
0
23:1
5
23:3
0
23:4
5
0:00
0:15
0:30
0:45
1:00
1:15
1:30
1:45
2:00
8:00
Conversion of ATMsConversion of ATMs The conversion of ATMs passed smooth, one minute after midnight
there were 28% of operating ATMs, and two hours after midnight almost 94% ATMs (conversion of POS passed even faster).
Source: NBS.
Share of operating ATMs
40
Cash ExchangeCash Exchange Till 16.1.2009 – dual
circulation – both SKK and EUR
Exchange in banks notes till 31.12.2009 coins till 30.6.2009no-fee limit: up to at
least 100 pieces Exchange in NBS
notes forever coins till 31.12.2013no fees, cash must be
counted and sorted
41
Dual circulation period - payments Dual circulation period - payments
Source: EC.
102
9693
77
63
48
28
16
8778
64
452718
10
102030405060708090
100
1.I 2.I 3.I 4.I 5.I 6.I 7.I 8.I 9.I 10.I 11.I 12.I 13.I 14.I 15.I
shar
e (
%)
Payments in SK Payments in €
Share of payments in koruna and euro
42
Dual circulation period – cash in walletsDual circulation period – cash in wallets
Source: European Commission.
9795
2432
44
56
76
909896
88
82
63
48
3629
0102030405060708090
100
1.I 2.I 3.I 4.I 5.I 6.I 7.I 8.I 9.I 10.I 11.I 12.I 13.I 14.I 15.I
shar
e (%
)
Mostly or only euro banknotes Mostly or only euro coins
Share of euro coins and banknotes in wallets
43
Dual Circulation Period (Change in Dual Circulation Period (Change in €€))
Source: Eurobarometer.
Change given in euro
0
10
20
30
40
50
60
70
80
90
100
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26.
Malta Cyprus Slovenia Slovensko
44
Koruna Cash in Circulation Koruna Cash in Circulation
Source: NBS.
0
20
40
60
80
100
120
140
160
1.IX 1.X 1.XI 1.XII 1.I
(bil
. SK
K)
45
0
10
20
30
40
50
60
70
80
90
100
IX.04 I.05 V.05 IX.05 I.06 V.06 IX.06 I.07 V.07 IX.07 I.08 V.08 IX.08 I.09
Information about euro is sufficient / more sufficient than not Source: ŠÚSR.
Information LevelInformation Level
46
Support for the EuroSupport for the Euro
0
10
20
30
40
50
60
70
80
90
Sept (-4) Apr (-3) Sept (-3) Apr (-2) Sept (-2) Apr (-1) Sept (-1) Mar(+1)
SK SI MT CY
Source: Eurobarometer, ŠÚSR (ex-post survey in Slovakia).
47
Fears - Price increasesFears - Price increases
0
10
20
30
40
50
60
70
80
90
Sept (-4) Apr (-3) Sept (-3) Apr (-2) Sept (-2) Apr (-1) Sept (-1) Jan (+1)
SK SI MT CY
Source: Eurobarometer.
48
ConclusionConclusion Early start Broad consensus (both political and social) Major economic reforms long before Maastricht
assessment Good luck All stakeholders involved from planning stage Plan for the worst, hope for the best
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Thank you Thank you for your attentionfor your attention
2€ 1€
50, 20, 10 c 5, 2, 1 c