Potocnik: "Slovenië op weg naar invoering van de euro" (en)

SPEECH/06/179

Janez POTOCNIK

European Commissioner for Science and Research

Closing keynote address at the EMU Governance and Euro Changeover

Ljubljana, 17 March 2006

Dear colleagues, Ladies and Gentlemen,

It is a great pleasure for me to be in my home country today and to have the opportunity to close this important conference on the introduction of the euro in Slovenia.

Slovenia has successfully accomplished economic transition over the last 15 years since its independence in June 1991. During the early nineties its favourable macroeconomic conditions helped the country to manage the early stages of the transition in a relatively painless manner. Subsequently, some stabilisation measures helped the economy to recover strength. At present, some major challenges notably related to structural reforms are lying ahead. They are to be seen in the overall context of the Lisbon strategy reforms that the European Union is to undergo in order to remain competitive and retain the quality of life of its citizens.

Since becoming a member of the European Union in 2004, Slovenia has been making steady progress towards the adoption of the Euro and full membership of the EMU. Provided Slovenia continues to meet all the criteria, it will join the euro area in less than 10 months from now. During the first half of 2008, it will also be the first new Member State holding the Presidency of the Council of the European Union.

Both as a Slovenian citizen and as a member of the European Commission, I obviously take much pride in these achievements which demonstrate our country's strong commitment to the European Union. The adoption of the euro will symbolically mark the end of a very long road away from the transition society and economy. Less than 20 years ago, Slovenia was part of a country where hyperinflation was the key word, where market economy was not much more than a theory concept, where the price of bread in the afternoon was not the same as in the morning and where the official currency was depreciating so steadily and quickly that the Central Bank could hardly keep up with the pace of inflation by issuing new banknotes.

At the same time, the changeover to the euro should mean also that we need to be wary of any form of complacency. There is still a lot of work to be accomplished if we want to reap the full benefits of our membership of the European Union and our future participation in the euro area.

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As Commissioner Joaquin Almunia i emphasised this morning, European and Monetary Union has been successful in implementing a stable macroeconomic framework. The Maastricht Treaty requires Member States to achieve a high degree of nominal convergence. This is a crucial precondition to be achieved in order to reap the full benefits of joining the euro area and therefore a top priority for the government. Slovenia has made, and should continue to make, important efforts to fully comply with the Maastricht convergence criteria on a sustainable basis. A small and open economy like Slovenia's has everything to gain from the introduction of the euro.

Slovenia appears to be a frontrunner in respect of achieving the necessary degree of convergence. The Slovenian government has already asked the Commission to prepare a Convergence Report. As announced earlier this week, the Commission should adopt its opinion on Slovenia in May. Without prejudging the outcome of this exercise, I will say that Slovenia is making steady progress in this respect. Budget deficits and government debt have remained low, although the long-term sustainability of public finances gives cause for concern.

The "tolar" has remained very stable against the euro since Slovenia joined ERM II in June 2004. This has encouraged a gradual convergence in long-term interest rates. Inflation is the criterion with the lowest safety margin vis-à-vis the Maastricht reference value, although ensuring a durable convergence regarding the euro-area remains a clear priority for Slovenia. Concerning legal alignment, the process is also underway.

This conference is not the place to repeat the necessity of assessing the convergence criteria. However, Slovenia is certainly on the right track to adopting the single currency.

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The two afternoon sessions have highlighted the importance of practical preparations, including a comprehensive and well-planned communication strategy. Indeed, compliance with the Maastricht criteria does not by itself ensure successful introduction of the euro. Public administrations, enterprises and even the country's citizens need to be properly prepared for the new currency.

For my part, I will refrain from repeating the messages conveyed by the different speakers. I will focus on three key challenges which I consider to be of particular importance.

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The first challenge concerns the need to complete all practical preparations in time, and therefore to accelerate the current pace of preparations. In this respect, I would like to recall that the first-wave of euro countries started their practical preparations already in 1996. In other words, the introduction of euro banknotes and coins was preceded by six years of preparations. In the case of Slovenia, the first version of the national changeover plan was approved in January 2005, less than two years before the target date for the adoption of the euro.

On the one hand, I fully acknowledge that the current context differs from the previous one in several respects. For example, euro notes and coins already exist and a large majority of Slovenian citizens are familiar with them to a large extent. This will help to speed up the acceptance of the euro notes and coins by the general public. In addition, as indicated by several speakers this afternoon, a number of useful lessons have been learnt from past experience, and Slovenia should be able to benefit from this.

On the other hand, Slovenia has decided to adopt an ambitious "big-bang" scenario in combination with a very short period of dual circulation of only two weeks.

The "big-bang" scenario is extremely demanding as the country will switch from one currency to the other in a logical second. This scenario will be applied for the first time as regards the adoption of euro. I am therefore convinced that practical preparations definitely need to be speeded up as we have less than a year left to prepare ourselves for the changeover.

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The second challenge relates to the perception of price increases linked to the introduction of the euro. Even if the statistical data clearly indicate that the impact of the changeover on prices is marginal, public opinion in many countries is still holding the opposite view. This mistaken belief has spilled over to most of the countries preparing themselves to adopt the euro, including Slovenia.

To fight this belief, we must, first of all, by all means prevent the unfortunate possibility of unjustified price increases, before any such risks could materialise. The previous changeover has shown in which sectors the likelihood of such price adjustments is highest. A number of confidence-building measures should be put in place, not only in order to avoid such price rises, but also to reassure consumers in this respect.

For example, codes of conduct containing commitments on price stability are an adequate tool which has already proven its value in the past. Such agreements should be concluded between representative associations of both retailers and consumers. Their proper implementation should obviously be monitored, particularly right before and after the introduction of the euro cash and prompt corrective action should be taken whenever necessary.

In addition, we must also tackle consumers' misperception of such alleged price increases. In this respect, extensive information (including dual displays of prices and amounts) constitutes the most appropriate instrument. Commission surveys clearly show that the well-informed public has the least fears and apprehensions about changing over to a new currency. Conversely, lack of information generates fears and misperceptions.

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This brings me to the third challenge confronting Slovenia which is the need to develop and fully implement a comprehensive information and communication campaign, adopted by the Government in June last year. Slovenia is now entering into the decisive stage of this campaign and the importance of proper communication cannot be overstated. Citizens need to be informed about the benefits of the euro and the challenges which lie ahead. They are entitled to know how their concerns will be addressed. The latest Eurobarometer survey shows that 39 percent of the Slovenian citizens do not feel very well informed about the euro. The present conference constitutes a good example of the support of the European Commission to the Slovenian information campaign on the introduction of the euro.

Let me therefore briefly set out the broad lines of the strategy what the Commission is implementing in terms of communication activities on the euro. The top priority for our communication activities in 2006 is obviously to help the Member States which aspire to introduce the euro in 2007 or 2008 in their communication campaigns. A second priority is to improve the information on the euro and EMU within the Member States belonging to the euro area.

We are developing our communication activities based on the principles of decentralisation and subsidiarity, coordination and partnership. Communication activities should therefore be adapted to the specific needs and situation of the Member States involved.

In order to support Member States' communication activities on the euro introduction, the Commission concludes Partnership Agreements with them. The Partnership agreement with Slovenia was signed in November 2005 between Commissioner Almunia and Mr Bajuk, and is functioning smoothly and successfully.

Via those partnerships, the Commission supports a broad range of communication activities developed by the national authorities, such as publications, audiovisual campaigns, conferences and seminars, promotional materials, surveys and opinion polls. At central level, the Commission tries to complement the communication activities at national level.

The twinning programme constitutes another major form of action, whereby we support the exchange of best practice between euro-area Member States and countries preparing themselves. Slovenia has signed a twinning programme with the Netherlands and Lithuania on communication and information strategy.

Let me conclude on information by stressing once more: a comprehensive communication campaign to address these issues is essential for a successful changeover.

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Allow me to conclude my thoughts with this core message: I encourage Slovenia to make optimal use of the remaining nine months and something in order to ensure a smooth and efficient changeover to the euro. The Commission will be your active partner in this process. It will assist you in achieving a successful changeover. Both Mr Almunia and myself are ready to contribute to a successful changeover in Slovenia whenever and wherever we can.

Finally I would like to add that the introduction of the euro is more than a change of currency. We, Slovenians have seen and used a number of currencies in our recent history and are used to these changes. But the introduction of euro is special because it will show both that Slovenia wants to be fully part of Europe as well as that it is capable to do this and to fulfil this aspiration of its citizens. The adoption of the euro will be a clear proof that the enlargement of the European Union is a success, that new Member States can offer a lot to the Union and that they can shape its political and economic reality.

Euro is namely not just an economic project. Rather, it is one of the most important political projects that Europe undertook in the history of its integration. And despite numerous initial doubts and criticisms, it is a project that actually works.

Our destiny lies in the hands of Europe. Together with the other Member States, Slovenia will contribute to Europe's destiny.

Thank you for your attention.