The EuroZone Continues to Expand - January 7, 2009

By how many more will the Eurozone expand? Well you can add another name to the group of countries that are now supported by the value of the Euro.

To bring in the New Year, the newest member to adopt the European Union’s Euro, Slovakia became the 16th country to use the currency as their own monetary paper. in a country of some 5.4 million people, that brings the total amount of users of the currency to more than 330 million people, with an estimated GDP of more than $5.6 trillion, or in this case 4 trillion Euros.

“We are waving goodbye to the Slovak currency, to which we have become strongly emotionally attached,” said Prime Minister Robert Fico, who withdrew 100 euros ($140) from an ATM bank machine in the Parliament building. “At the time of the current global crisis” the Euro “is a psychological tool for Slovaks to boost their self-confidence.”

The recent decision comes as an economically strategic move by the country as numerous countries in that region have seen their currencies severely devalued amidst the global financial crisis. Slovakia joined the European Union in 2004.

For example, neighboring Hungary, once seen as a beacon of economic prosperity during the post-communist era in Eastern Europe, was forced last month to take out a lone from the International Monetary Fund to sidestep economic destruction.

Since the disbanding in 1993 of Czechoslovakia into two member states, the Czech Republic and Slovakia, the country has been able to enjoy steady economic growth throughout the country as exports, which consist of machinery, transport equipment, and manufactured goods, have continued to show strong advances.

In fact, Slovakia showed a record expansion in Gross Domestic Product (GDP) of 14.3% in their 4th quarter of 2007. Furthermore, during the country’s 3rd quarter of last year, GDP increased at an annualized rate of 7%. However, the OECD, the Organization for Economic Cooperation and Development, released their finding that showed that Slovakia’s projected growth rate for all of 2008 would come in around 4%. Although down over pervious years, it still shows a positive sign that the country can still continue to grow in an economic downturn, such as the one that we are all currently in.

With the country adopting the new currency and being able to maintain a positive growth pattern, other EU members are now looking to Slovakia as a possible investment area. Volkswagen AG, Europe’s largest automaker, has chosen to infuse capital into their factory their instead of shutting it down, and now has plans on restructuring the plant to produce a new car model in the coming months.

The greatest concerns for Slovakia were the transition from one currency to another. To date, there appears to be no major hassles encountered in the change over. Retailers are dealing quite well, due in large part to the declined traffic in stores as fewer people are shopping after the holiday season.

On new year’s day, more than 96% of the country’s ATMs has already began dispensing the new currency, while banks had begun to stockpile the currency in order to handle the rush of customers coming in to exchange the old paper for the new.

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