Former ECB Official Praises Achievements, Warns of Pitfalls 0

Ljubljana, 05 December

A former chief economist of the European Central Bank (ECB) on Tuesday lavished praise on the role of the Slovenian central bank, Banka Slovenije, in the preparations for the adoption of the euro. The bank has done its job well and with credibility, Otmar Issing said in a lecture in Ljubljana. Issing also met PM Janez Jansa later in the day.

Issing, a former member of the ECB executive board, said the central bank was instrumental in reigning in inflation and maintaining the stability of the tolar-euro exchange rate. The real convergence with the European standard of living has been "exceptional", said Issing. However, he was quick to point to the risks Slovenia faces due to its ageing population.
Slovenia's low public debt should not be an excuse for inactivity, it is necessary to prepare for the hard times, he said in a lecture organised by the central bank.
After Slovenia joins the eurozone it should not relax budget policy. It will also have to avert the rising labour costs which could have a negative impact on competitiveness, he said.
Once it adopts the euro Slovenia will renounce fiscal and exchange rate policy, but it will still have budgetary and structural policies to counter external shocks.
Budget policy is limited with the Stability and Growth Pact, which caps the budget deficit at 3% of GDP, so Slovenia has to strive to balance the budget or even push it into surplus, Issing explained.
In addition to the budget policy, Slovenia can mitigate external shocks with a flexible labour market. "The greater the flexibility, the better the reaction to shock," he said.
Issing also met PM Janez Jansa. The pair agreed that Maastricht criteria need to be upheld in the future and that the Slovenian economy would operate in the most stable economic environment after the euro switch, the PM's office said.
Issing believes Slovenia has enacted adequate measures against unjustified price hikes after the changeover. He added that it was very important that consumers react to the such hikes by boycotting products.
Jansa meanwhile said that the new generation of Slovenians are self-assured and that he believes in a bright future for the country.

Former ECB Official Praises Achievements, Warns of Pitfalls 0

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