Slovakia's church bells will ring out at midnight as the country joins the euro, putting it under the shared currency's protective umbrella amid a world financial downpour - and underscoring the former Soviet bloc nation's rapid economic progress.
Tomorrow, Slovakia will become the 16th country to join the euro, a European Union project which also celebrates its 10th birthday this New Year's Day. With Slovakia, the currency will be used by 330 million people with an annual gross domestic product of more than 4 trillion euros ($5.6 trillion).
Joining up is a milestone for the country of 5.4 million people in a region where others have seen their currencies buffeted by the financial crisis stemming from bank losses on securities backed by shaky U.S. mortgages. Economists predict the strong and stable euro will help the country weather the storm.
Slovak Prime Minister Robert Fico said joining was "the continuation of a success story that began with the entry into the European Union" in 2004. Fico was expected to be among the first to get euros at an automated teller machine in the parliament after midnight.
The new currency "could help the Slovak economy to cope with the economic downturn, and when it's over start new growth," said Marek Gabris, an analyst at the CSOB bank in Bratislava.
Neighboring EU member Hungary, once the beacon of economic success in the post-communist Eastern Europe, was forced earlier this year to accept a bailout from the International Monetary Fund to avert economic collapse, as has non-EU member Ukraine.
Slovakia is adopting as some people in EU members Denmark and Sweden are rethinking their countries' refusal to sign up, while Poland is speeding up efforts to join.
Iceland, which is not an EU or a euro member, suffered badly as an outsider, being hit with a combination of a plunging currency and the popularity of high-interest foreign currency loans. That means monthly loan repayments for cars and homes have doubled this year, hitting Icelanders hard as the economy teeters and jobs are slashed.
Katinka Barysch, an analyst at the London-based Centre for European Reform think tank, said the currency swings of recent months have underlined the benefits of the euro to east European states.
"The very stark experience of being in the middle of a global economic storm means they have felt very cold and uncomfortable," she said.
Slovakia is also the first nation that used to be in the Soviet orbit to join - while Slovenia also was communist ruled, it was part of Yugoslavia, which kept its distance from the Soviet Union.
The euro was introduced on financial markets on Jan. 1, 1999 and notes and coins first came into circulation in 2002. The zone widened to 15 nations this past January when Cyprus and Malta joined; the other members are: Belgium, Germany, Ireland, Greece, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal, Slovenia and Finland.
Slovakia completes a difficult transition after shaking off decades of communist rule in 1989. It endured several years of isolation under autocratic Prime Minister Vladimir Meciar in the 1990s, then made rapid economic progress with free-market reforms under former Prime Minister Mikulas Dzurinda.
Slovakia introduced a flat tax of 19 per cent in 2004 and kept labor costs low, enticing western European and Asian car and electronics manufacturers to set up factories. Kia Motors Corp., South Korea's second-largest automaker, said the euro was one of the key reasons to invest €1 billion into a new plant that opened in 2006 in western Slovakia.
The old currency, the Slovak koruna, will be in circulation alongside the euro until Jan. 16 and banks are expected to open Thursday to exchange koruna for euros.
AP