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Home / News - Slovakia in 2008
Slovakia in 2008 Overall, the year 2008 was a positive one for Slovakia, particularly on the economic front, as the approval of Eurozone membership brought added stability to the country. Despite the global slowdown, the Slovak economy performed relatively well, benefiting from reform measures taken by the 2002-06 cabinet. Several foreign investors ramped up production, while falling unemployment and rising wages drove household demand. Despite skepticism over Slovak inflation prospects, European Union (EU) authorities backed the country's Eurozone membership in mid-2008, with accession scheduled for January 2009. Slovakia was the second state in post-communist Europe?after Slovenia?to be admitted to the Eurozone, and others were at least several years behind. Although many Slovaks were nervous that euro adoption could negatively impact inflation, the approval of Eurozone accession was nonetheless a source of pride. Indeed, Eurozone entry helped Slovakia to escape much of the turmoil from the international financial crisis. While other new EU member states have suffered from sharp shifts in their currencies vis-à-vis the euro, Eurozone accession will protect Slovakia against exchange rate fluctuations and should therefore raise investor confidence. The final koruna/euro conversion rate was set at 30.126, a level that is much stronger than originally expected and up froman average of 33.78/euro in 2007. While Eurozone entry approval had a positive impact on the government's popularity, Prime Minister Robert Fico received another boost from abroad in February, as the Party of European Socialists (PES) readmitted his party, Smer [Direction]. The PES, an umbrella group for left-wing parties within the EU, had suspended Smer's membership after the 2006 elections, when Fico formed a government with two parties that are seen as outside the European mainstream, particularly in the case of the far-right Slovak National Party (SNS). According to the PES, the decision to restore Smer's membership was based on Fico's demonstrated social-democratic orientation and commitment to minority rights. In addition, Fico's favorable attitude toward further European integration, including euro adoption, was probably a factor as well. From a political standpoint, Slovakia was quite stable in 2008, as the ruling parties continued to register strong public support, while the opposition struggled to find its voice. The ruling coalition was not without controversy and scandal in 2008, as three ministers were replaced and calls were made for the resignation of several others. Still, the opposition had few tools to use against the ruling coalition, particularly given the country's strong economic performance. One issue of particular concern to the opposition was a controversial press bill that was seen as limiting pluralism. The opposition parties tried to tie the press bill to the ratification of the EU Reform Treaty, blocking the treaty's approval as long as the government insisted on the press bill. The Reform Treaty needed to be ratified by at least 90 deputies in the 150-member parliament, but the ruling coalition held only 85 seats. After several months of wrangling, the parliament backed both documents in April, and the opposition parties' tactics failed as one of the three?the Party of the Hungarian Coalition (SMK)?ended up voting in favor of the Reform Treaty. From a business perspective, the investment environment continued to deteriorate modestly in 2008, a trend that began after Fico took office. In June, the Business Alliance of Slovakia (PAS) warned that if this tendency continues, Slovakia's economic growth potential and living standards will rise slower than originally expected over the coming years. In 2007, GDP per capita in purchasing power terms reached just 69% of the EU average (up from 50% in 2000), making Slovakia the poorest Eurozone member. |