(Adds details, background)
By Marcin Grajewski
BRUSSELS, May 28 (Reuters) - Slovakia revalued its crown
currency against the euro on Wednesday, ahead of its entry into
the euro zone, the European Commission said.
The crown's central parity in the exchange rate mechanism
ERM-2, a precursor to euro adoption, has been revalued by
17.6472 percent to 30.1260 against the euro, the European Union
executive said in a statement.
In the ERM-2, the crown is allowed to move within a band of
plus/minus 15 percent around the central rate. It traded at
30.52 late on Wednesday, according to Reuters' data.
"The revaluation of the central rate of the Slovak koruna is
justified by ongoing improvements in underlying fundamentals. It
will support the authorities in maintaining macroeconomic
stability," the European Union executive said.
The revaluation followed the Commission's recommendation to
permit Slovakia to join the euro zone on Jan. 1, 2009. EU
finance ministers are expected to clear the decision next
The Commission said the move, which followed firming of the
crown in the last year, is justified by Slovakia's economic
fundamentals and will support the authorities in maintaining
"The revaluation is based on a firm commitment by the
authorities to pursue appropriate supportive policies, aimed in
particular at maintaining price stability in a sustainable
manner, underpinning external competitiveness and strengthening
economic resilience," it said.
Euro zone countries, the European Central Bank (ECB) and
other countries also in ERM II had agreed to this request by
Slovakia, the statement added.
Financial markets have expected the revaluation to take
place as a tool to help the government fight inflation, which
had been the main obstacle on Slovakia's path to the euro zone.
EU finance ministers will set the crown's final exchange
rate against the euro in early July.
Greece also revalued its drachma peg ahead of its euro zone
entry in 2001.
A ministers' draft decision showed that EU finance ministers
will next week let Slovakia join the euro zone as expected and
urge the country to follow sound fiscal policies.
Slovakia is thus set to become the 16th member of the euro
zone and the fourth of the bloc's new members that joined the EU
since 2004 to adopt the euro.
Much smaller Slovenia entered the single currency zone in
2007, followed by Cyprus and Malta this year.
(Editing by Elizabeth Piper)