site.btaSlovenia Ready to Share Experience in Adopting Euro with Bulgaria

Slovenia is ready to share its experience in adopting the euro with Bulgaria, Slovenia’s Central Bank Vice Governor Primoz Dolenc said in a BTA interview. Slovenia joined the EU in 2004 and entered the so-called eurozone waiting room (ERM II Exchange Rate Mechanism) the same year. In 2006, the country fixed the exchange rate of its national currency, the Slovenian tolar, to the euro, and in 2007 it became the 13th member of the eurozone.

Commenting on the adoption of the euro and the transition from national to the common European currency, Dolenz said that Slovenia served as a best practice example for Croatia, which will join the eurozone on January 1, 2023, and now it can help Bulgaria, as well.

The countries that will join the eurozone in the coming years will have no problems in adopting the euro, now that the common currency has been in use for more than 20 years, he said. In Dolenz’s words, the situation in Bulgaria and Croatia is similar as both countries have significant income from tourism – many visitors go with euros to Croatia, the Croats are familiar with the currency, and the situation in Bulgaria is not much different, he said.

According to Dolenz, in Slovenia’s period of adaptation to the euro it was very important that Slovenians have already been used to the common currency because their neighbours from Italy and Austria were already using the euro and Slovenia had strong trade and tourism ties with them. The information campaign carried out in coordination with various Slovenian institutions has also played an important role in the transition, he added.

Slovenia is a small, open and export-orientated economy. Even before the introduction of the euro, the country has been strongly integrated into the European market, thus having strong ties to the euro. The euro’s quick adoption was a political decision, but it was underpinned by Slovenians’ high level of trust to it as the country’s future national currency. "We were used to the German marks, we were used to euro. In a way, we trusted this currency well before it came to Slovenia," Dolenz said.

In his words, the third factor for Slovenia to adopt the euro so fast was the country’s readiness to do it. "There are 5 Maastricht criteria and we were able to fulfil all of them fast enough. You know that, being part of former Yugoslavia, we had a huge issue with inflation. We had high persistent inflation, even hyperinflation, so we had […] a strong incentive to put it down. The euro was an option to do that in a natural way," Dolenz explained.

"As I said, the main challenge was the inflation as we recorded high inflation rates before joining. There was a strong commitment and joint coordinated effort from the Slovenian government and the bank of Slovenia to bring the inflation down," he emphasized, adding that, in 2001, Slovenia’s central bank adopted a new monetary policy strategy, as its primary goal was to secure price stability.

According to Dolenz, there are not a lot of disadvantages of joining the eurozone. He restated that, historically, Slovenia is strongly integrated into the European markets, in European production and European supply chains, and receives a lot of income from international tourists. A huge advantage of the euro adoption is that business uncertainty has decreased significantly. Furthermore, the euro has contributed a great deal for Slovenia’s competitiveness, and more competitive prices contribute to keeping the economic environment more stable. "There is another factor that might be not so important, but international borrowing is easier. The bottom line is that the euro brought low interest rates for Slovenia, it brought financial stability, price stability, and that stability has huge indirect effect on the business and the people,", he explained.

According to Dolenz, in theory, joining the eurozone has one disadvantage - the loss of Slovenia’s sovereignty in conducting monetary policy to balance its own business cycle.