Slovakia will be eurozone’s poorest
By Peter Laca and Jan Lopatka
SACA, Slovakia, July 16 (Reuters) – "What can I buy with 300?" cries Marca Tancosova, a Roma woman worried that her 9,000 crown ($473.9) welfare check will shrink after Slovakia adopts the European Union's common currency next year.
Tancosova, a character in a play being performed in the eastern Slovak town of Saca, finally rejoices after her family explains the real value of her income will not change, and she can buy exactly the same as before the Jan. 1 euro adoption.
If only it were that easy.
Fearing public confusion and complaints of rising prices, the government of leftist Prime Minister Robert Fico has launched a 160 million crown ($28.96 million) campaign to explain what will happen when Slovakia becomes the euro zone's poorest member when it switches its crowns for euros.
The theatre troupe is part of that push, touring the country to spread information about the euro among its Roma minority, a group rights activists say could number half a million people largely living in poverty on the margins of society.
"The aim was to pass on the information about euro adoption in a way that is interesting," Karel Adam, the Romathan group's chief and violinist told Reuters as the actors prepared to perform the mixture of songs, dances and sketches.
"The idea to include our theatre came from the national bank, because we are closer to the Roma community, and we understand the mentality," Adam said.
The play centres on a Roma family returning from a stay in Ireland, and features barefoot dancers in traditional colourful dresses decorated with gold.
The Roma, or gypsy, people often receive little education and struggle to find jobs. Thousands in the country's east live in slums with no running water or electricity, a stark contrast with prosperous capital Bratislava, 450 km (280 miles) west.
Economists say poorer populations are most at risk of potential negative effects from the euro switchover, which could include a spike in inflation and a widening of the wealth gap if wages and pensions are not raised at the same rate.
Fico, who won the 2006 election on promises of more welfare after austerity measures adopted by the previous administration, has warned firms against using the switch as an excuse to hike prices and threatened to jail those who do. Anecdotal evidence suggests such abuse has happened in other euro joiners.
INFLATION FEAR
Slovakia will become the second former Communist country after Slovenia to join the 15-nation currency bloc, crowning two decades of transformation from a command economy.
But, with around 62 percent of the euro zone's average gross domestic product per capita, it will be the area's poorest state and will have the furthest to catch up in income and prices.
Price convergence with Western Europe can only come via inflation as, pinned to the euro, the crown cannot appreciate — unlike in neighbouring Hungary, Poland and the Czech Republic, which have put off euro adoption and can watch their currencies firm for several more years.
An opinion poll in April showed nearly three quarters of Slovaks are worried the switchover will push up prices. Many economists are of the same opinion.
A Reuters poll showed on Wednesday that 22 of 29 analysts did not think Slovakia would be able to hold inflation within EU criteria stating price growth must not exceed 1.5 percentage points over an average of the three lowest EU states (for story, double-click on [EMU/MEMS1].)
"Prices in Slovakia are generally cheap and will need to adjust upwards," said Nigel Rendell at RBC Capital Markets.
Slovenian inflation soared to 6.8 percent in June, by far the highest in the euro zone.
POOR ARE MOST EXPOSED
Eastern Europe's estimated 9-12 million Roma are the poorest sector of society in the region, where living standards are generally lower than among their western neighbours.
Analyst Zdenek Lukas of Vienna's Institute for International Economic Studies said inflation always hits the poor hardest.
"The highest inflation growth dynamic is in prices of energy, which is a very important part in the consumer basket of the poor population. Likewise, a great part in the consumer basket of the poor population is food," Lukas said.
Most of the play's 300 spectators in Saca were aware of the euro's arrival, and those questioned usually knew the conversion rate would be around 30 crowns per euro — close to the official 30.1260 set last week.
But Monika Cisarkova, a 36-year single mother old on maternity leave who came to see the play with some of her five children, is worried. She lives on 4,760 crowns per month in benefits, which would be 158 euros in January.
"It is already hard to live on what we are getting now. It will be even harder when the euro comes," she said.
