EU report sees Slovakia inflation problem

Vienna  -  Slovakia's headline inflation will spike well above the eurozone's this year, the European Commission said Monday, casting a shadow over Slovak hopes to join the currency club on January 1.

Slovakia would be the first euro member from the former Soviet bloc and has met key euro benchmarks, including those on current inflation and the public deficit. But questions remain about whether it can keep price rises low in the long run.

Slovakia's average 2008 inflation will rise to 3.8 per cent in 2008 from 1.9 per cent last year, the European Union's spring economic forecast said.

By contrast, the report pegged average inflation for the 15 countries using the euro at 3.2 per cent, with the entire European Union - of which Slovakia is a member - at 3.6 per cent.

The European Central Bank (ECB) and the European Commission are expected to rule May 7 whether Slovakia is fit to join the eurozone.

Slovak leaders insist that adopting the euro will not lead to an inflation burst as happened in Slovenia after that country joined the eurozone last year.

For Slovakia to join, EU authorities also need to close a probe against Bratislava for its past overshooting of the limit on budget deficits for countries that want to use the euro - 3 per cent of gross domestic product (GDP). (dpa)

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