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Last Updated: Friday, 16 June 2006, 11:03 GMT 12:03 UK
Euro joy boosts Slovenian pride
By Oana Lungescu
BBC News, Ljubljana

Gorenje factory
The Gorenje fridge factory has a big export business
Just 15 years ago the tiny Alpine republic of Slovenia was still part of Yugoslavia.

But on Friday, EU leaders gave the country the ultimate accolade - the green light to join the eurozone.

So on 1 January next year, Slovenia will become the first former communist country to adopt the euro.

On the outskirts of the capital Ljubljana, Slovenia's political and business elite are gathered for a flamboyant party. There are flashing blue lights, wild music, and muscular dancers wearing little else but silver body paint.

It is not the launch of the euro - yet. They are unveiling a sleek new fridge from Gorenje, Slovenia's largest household appliances maker and the country's biggest exporter.

For Gorenje's boss Franjo Bobinac, adopting the euro is a way of enhancing the national brand.

"We are proud of it," Mr Bobinac says. "I think it's a great thing for the image, for the identity of the country as a whole. We are a small nation of only two million people. So first of all we are obliged to sell the country, the image, the identity, and then to sell the companies, products and services that we offer."

Passing the euro-test

More than 8,000 people work at Gorenje's main factory, set among rolling hills and orderly villages an hour's drive from Ljubljana. It turns out more than three million fridges, cookers and washing machines every year, mostly for export throughout Europe.

Prices are displayed both in tolars and euros in Ljubljana's central market
Prices are shown both in tolars and euros in Ljubljana
Companies like Gorenje will have to spend anything up to one million euros (683,000) just to get ready to use the new currency. And with prices expected to rise, it seems inevitable that workers will demand higher wages, too.

Until now, the employers and trade unions have agreed to keep inflation low, for the sake of what has become a national project. But that may not last.

"I hope we won't be paid less forever," says Zan Zeba, a union official, at the factory. "We need to be paid more like in Germany, Austria or France."

Slovenia is already the richest of the eight former communist countries in the European Union, with average wages on a par with Greece or Portugal.

All of the eight countries have made a commitment to adopt the euro. For them, it is not a matter of if, but when. But they need to keep their inflation, debt and budget deficits low to pass the stringent euro-test.

Slovenia's Finance Minister Andrej Bajuk is happy with his country's figures. But even he needs a calculator to convert the price of a meal from Slovenian tolars into euros.

Slovenia's Finance Minister Andrej Bajuk
Even the finance minister needs a calculator for euro conversions
Every family will get a calculator for free from the National Bank, as the government is concerned that the complicated exchange rate might give retailers a pretext to put up prices.

"We have to divide by 239.67," Mr Bajuk says, "and the rounding up could have very big effects on the rate of inflation. We have been preparing for months, but in a market economy, the best inspector is the consumer himself."

Paying the price

In Ljubljana's central market, like all over the country, prices have been displayed both in Slovenian tolars and in euros since March. This is much earlier than in the other countries that have introduced the euro, to give consumers time to adjust.

Breda Kutin, president of the consumers' association, believes Slovenia is learning from the experience of other countries like neighbouring Italy, which saw big price hikes. Dual price display, she says, "is a tool so that people can learn the value of money for everyday purchases, not just for travelling and holidays. It's also a sort of control for consumers, because otherwise they lose track."

Although about 60% of Slovenians say they are in favour of the euro, many worry that the price of coffee and beer will go up.

Slovene pensioners dancing
Provision for the elderly is a big challenge for Slovenia
"I think it's going to be difficult at the beginning and we'll spend more money," a young woman says.

"It's both good and not good," says a man, "prices will go up for sure, but on the other hand I believe the economy will stabilise."

Slovenians have seen currencies come and go. The Yugoslav dinar brought them 1,000% inflation, so most people used the Deutschmark instead.

After independence, the tolar was introduced practically overnight. But to keep the economy fit for the euro, the government will have to bring in more extensive privatisation of the state sector and cuts to the pension system.

The population is ageing so fast that one in four Slovenians is a pensioner.

At an activity club in Ljubljana, they are busy taking gym classes, checking the internet or singing old favourites.

The government says pension reform would be needed, even without the new currency.

But Vinko Gobec, president of the Pensioners' Association of Slovenia, is concerned that the elderly might pay a higher price than most. "I'm very disappointed that some EU officials are imposing this pension reform," he says.

"We've already had cuts and we don't need more before 2020. What we need is a good economic policy. There's no point trying to solve problems on the back of the old and sick."

Yet Slovenians, young and old, are sure to have a party on 1 January to celebrate the country's entry into Europe's most exclusive club.

They will be watched with some envy by the Lithuanians. They were turned down this time because their inflation rate was a fraction too high.

Poland and Hungary, the biggest new EU members, will have to wait until the end of the decade.

Slovenia clear to adopt the euro
16 Jun 06 |  Business
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