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Slovenia Business Week no. 02: Slovenia Adopts the Euro, Becomes 13th Eurozone Member

The historic switch to the single European currency went smoothly and people and businesses are gradually adapting to a life without the tolar

Slovenia adopted the euro in a "big bang" scenario on Monday, 1 January, becoming the 13th member of the eurozone, which has now expanded to a population of over 316 million. The historic switch to the single European currency went smoothly and people and businesses are gradually adapting to a life without the tolar.

Automatic teller machines (ATMs), which were shut down at 9 PM on New Year's Eve, were gradually brought back into service shortly after midnight and Finance Minister Andrej Bajuk was one of the first people to withdraw crisp euro bills in the centre of Ljubljana.

"This has been a great challenge for our economy, politics and social partners. We all joined forces to carry this out," Bajuk said. "I think this is a proof of what Slovenians can achieve if we tackle a problem and resolve it for the common good," he added.

The network of over 1,500 ATMs was considered as one of the trickiest parts of the transition, as all balances on all bank accounts had to be translated into euros in just three hours and the ATMs stocked with euros. By Monday, 1 January afternoon some 90% of the cash dispensers were back in service.

Until 4 PM some EUR 770,000 was withdrawn from ATMs. Slovenia has some SIT 215bn (EUR 897m) in tolar bills and coins, but only about SIT 100bn (EUR 417m) are currently in circulation.

Point-of-sale (POS) terminals were also brought into service according to plans in the first hours of 2007. There had been some concerns about the changeover for round-the-clock establishments, but no problems were reported handling two currencies and returning change in euros, although some said they might run out of change.

Bajuk and central bank Governor Mitja Gaspari stressed that the transition was a success. "It is important that ATMs and POS terminals are working, but also that the banks have made the transition to the euro with their back-office and other processing tasks," Gaspari said.

Gaspari was adamant that the transition would be completed successfully until 15 January. There is enough cash to make the phase-out of the tolar a smooth affair. "We are counting on most tolars going out of circulation in the first week."

The people's biggest fear has been that prices will be rounded up and in many cases that has indeed happened. However, it is not expected to have a big impact on inflation. As Bajuk said on several occasions, people should "vote with their feet" and simply refuse to buy overpriced items.

The same message was provided by European Monetary Affairs Commissioner Joaquin Almunia. "As the Slovenian people starts paying and receiving change in euros, I wish to remind them to be careful in the next few days and weeks and also to watch out for the prices," he said.

Although a recent Eurobarometer survey showed that people are not too attached to the barely 15-year-old tolar and over 70% of the people were happy to get the new currency, there was some nostalgia. A bar in Primorsko reported that people refused to take euros for change even though proprietors are only allowed to return euros.

"Saying farewell is usually not very nice. But this time it is about good memories and the hope that we are adopting a currency that is as good or even better" than the tolar, Gaspari said after he changed some tolars into euros shortly after midnight.

Celebrations in Ljubljana coincided with New Year's festivities in the city centre. Thousands of revelers witnessed the release of some 3,000 yellow and blue helium balloons with euro signs at midnight.

The two currencies will be in simultaneous circulation for only two weeks. Banks and post offices will continue changing tolars commission-free until 1 March at the official rate of 239.64 tolars to the euro. From March on, only the central bank will change tolars.

The Slovenian economy is entering the eurozone healthy, enjoying one of the strongest spells of growth since independence in 1991. According to the Statistics Office, the economy expanded by an annual 5.6% in the third quarter, the EU-compatible inflation rate was 2.5% and the anticipated budget deficit well below the EU-set threshold of 3% of GDP.

The changeover is estimated to cost one billion euros, but promises to pay dividends many times bigger. Not only will it cut transaction costs for exporters and importers, it is also expected to boost competitiveness, improve stability and put Slovenia on the global financial map.

Banka Slovenije will no longer be able to act independently in the field of interest rates. Nevertheless, it will become a part of the decision-making bodies at the European Central Bank (ECB) and play an important role in shaping monetary policy in the eurozone along with the other 12 members.

Source: Slovenian Press Agency STA

Author: STA, Slovenian National Press Agency