Slovak leftist says centre-rights threaten euro

Slovakia's future leftist Prime Minister, Robert Fico, on Sunday accused the outgoing centre-right cabinet of causing high inflation and endangering euro adoption in the target year of 2009.
Fico's party, Smer, won a June 17 election, beating Prime Minister Mikulas Dzurinda, and he will sign a ruling coalition agreement with the party of former authoritarian ruler Vladimir Meciar and the far-right Slovak National Party later on Sunday.
Investors were concerned the future cabinet would delay the euro zone entry and the crown currency fell sharply last week.
Analysts said Smer's intentions to lower the value-added tax on some items and boost spending on social issues could prevent reduction of the fiscal deficit under 3 percent of GDP, which is required for adopting the common currency.
But Fico said on Sunday it was Dzurinda who would be responsible if Slovakia missed the euro zone entry target.
"If there is someone endangering Slovakia's entry to the monetary union, it is the current government, because the inflation rate today is unacceptable for the monetary union," Fico said in a debate on the public Slovak Television.
Slovakia's inflation has accelerated in the past year, mainly due to high cost of oil which has driven up prices of natural gas and heating.
The EU-norm inflation, the central bank's main price growth yardstick, was 4.8 percent in May, after April's 4.4 percent.
The central bank raised interest rates by 50 basis points in May and said further policy tightening was possible. The bank expects to meet the end-2007 inflation target of 2.0 percent, which it had set to make Slovakia eligible for euro adoption.
Fico has been ambiguous about the euro zone entry. He has said his government will respect the current target year, but at the same time it will examine whether adopting the common currency in 2009 is favourable for the economy and the people.
"The euro zone entry means prices approaching levels in the European Union... I am asking how someone can live on a pension of 220 euro a month when prices will equal 80 or 90 percent of levels in the European Union," the leftist leader said.
"We will have to decide how to fight inflation, what to do to make sure things work out on January 1, 2009. But, we will also have to think about those people with extraordinarily low income."