Reden und Präsentationen

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Ladies and Gentlemen!

Today we celebrate that Slovenia successfully entered the euro area at the beginning of this year – this time in a smaller, bilateral circle. Let me take this opportunity to flag some messages concerning both of our countries and the euro area as a whole.

Slovenia’s introduction of the euro represented a precedent in two respects: Slovenia was the first of the ten new EU Member States to adopt the euro. And it was the first country to perform both the adoption of the euro and the cash changeover on a single day – in an approach that is called the “big-bang” approach.

1.     Slovenia’s Success Story

The adoption of the euro was the result of a convergence process that has brought Slovenia close to the most advanced European economies over the past years. Slovenia managed to meet the demanding convergence criteria through stability-oriented macroeconomic policies and tough structural reforms in a climate of social partnership. 

In terms of nominal convergence, the country’s success can be demonstrated by a substantial reduction in inflation from double-digit levels to 2.5% within the last ten years as well as by relatively sound public finances.

In terms of real convergence, economic growth in Slovenia has been markedly higher than the euro area average over the past few years. As a result, per-capita income levels in Slovenia are exceeding those in Portugal and Malta and come very close to those of Greece. This catching-up was primarily achieved through increasing labor productivity, but also by keeping employment rates above, and unemployment rates below, the euro area average. 

2.     The Benefits of the Euro for All of Us

Membership in EMU will contribute to maintaining both Slovenia’s and Austria’s economic stability. The credibility of the Eurosystem’s monetary policy and the euroarea’s sustainable fiscal policy framework will improve our resilience to shocks. By solidly anchoring medium- to longer-term inflation expectations in the euro area at levels consistent with price stability, monetary policy can make an ongoing contribution towards fostering sustainable economic growth and job creation in the euro area. 

Equally, the adoption of the euro has eliminated the cost of exchanging money for most international transactions of our citizens and businesses. This means more convenience for tourists and higher price transparency for consumers. It also supports further trade integration and produces efficiency gains due to the elimination of exchange rate risks within the euro area. Moreover, further financial market integration will lower the cost of capital.

3.     Austria’s Success Story

These benefits can be substantiated by Austrian experience. 

Compared to the decade before Austria joined the EU, the average inflation rate has since then gone down by one percentage point to an average of 1.7%. According to most recent estimates, the first ten years of EU membership have increased the level of Austrian GDP by a total of roughly 4 ½ percentage points. About one-fifth of this effect was due to monetary union. 

Another 3½ percentage points can be attributed to the opening-up of markets in Central and Eastern Europe. Taking all integration events together, around 100,000 to 150,000 jobs have been created in Austria so far, and another 3,000 per year are likely to be generated in the near future.

All this indicates that Austria is among the key beneficiaries of enlargement and integration in Europe.

4.     Remaining Challenges for Austria

I have mentioned only some of the positive effects for Austria due to time constraints. On the other hand, one also has to concede that the entry into the Single Market also entailed adjustment costs for some economic agents. On balance, however, the decision to join the EU was clearly advantageous for our country as a whole. Certainly, the same can also be said for Austria’s participation in the euro area. Let me stress here, in particular, the euro’s role as a catalyst for further integration in Europe.

In view of increasing international competition, Austria is well advised to continue its reform efforts, thereby further building on the progress that has already been achieved in recent years, for example in the area of pension and tax reforms, but also in stepping up Research & Development activities.

Thus, pursuing reforms in Austria is in our genuine interest. Structural reforms will yield welfare gains such as stable prices, economic growth and employment. In turn, moderate unit labor costs, increased product market competition and consolidated public finances will further improve the competitiveness of Austrian firms and the country’s attractiveness as a business location.

5.     Cooperation of Austria and Slovenia

Austria plays an important role in Slovenia’s external economic relations: For Slovenia, Austria is a major trading partner, ranking third after Germany and Italy, while for Austria trade with Slovenia takes a smaller weight in total trade.

Trade [exports plus imports] between Austria and Slovenia amounted to EUR 2.8 billion in 2005 [EUR 2.6 bn during the first eleven months of 2005] and to EUR 3 billion in the first eleven months of 2006. Trade has increased by around 16% from the first eleven months of 2005 to the same period of 2006. It has almost tripled in nominal terms during the last ten years.

Slovenia’s exports to Austria are concentrated on machinery and manufactures, moreover on electric energy, steel and iron. Slovenia’s imports from Austria show a fairly similar goods structure, which appears to suggest that a large share of trade is intra-industry trade.

Let me illustrate this with some figures: Machinery and transport equipment together with basic manufactured goods accounted for slightly more than 60% of total Slovene exports to Austria during the first eleven months of 2006. At the same time, the same product categories made up almost 80% of Slovenia’s imports from Austria.

By the same token, Austrian companies are by far the most important direct investors in Slovenia (around 30%). Austrian banks, in particular, are among the leading foreign market players in the Slovenian banking sector and provide significant financing for the Slovenian corporate sector.

Slovenia’s active participation in monetary union is important for the euro area as a whole, even though the country is relatively small in terms of GDP (0.3%) and population (0.6%). 

The Slovenian example shows that the euro area is open for all EU Member States that meet the conditions set out in the EU Treaty. Slovenia has also proved that it is indeed possible for a new Member State to successfully meet these conditions.

Given the economic links of our countries and our common responsibility for the European integration process, the OeNB wishes to continue its close cooperation with Banka Slovenije. And the city of Graz will hopefully continue to be the venue for some of our common events.