BRUSSELS, December 14 - Slovenian Prime Minister Janez Jansa says he has learned from the mistakes of Italy and other EU countries in trying to avoid price rises when the former Yugoslav republic introduces the euro currency next month. Slovenia this year became the first ex-communist new member state of the 25-nation European Union to qualify to join the single currency shared by 12 "old" countries.
Prime Minister Jansa told Reuters he had a frank conversation about the problem of euro-induced price hikes with Italian Prime Minister Romano Prodi two years ago, when Prodi was president of the executive European Commission. "He warned me very, very directly then and honestly that Italy had made mistakes. They underestimated the situation and others had really bad experiences," Prime Minister Jansa said in an interview ahead of an EU summit in Brussels. Public perceptions of price rises, especially in Italy, Germany and France, outstripped official inflation figures after the roll-out of the euro in January 2002. That caused anger reflected in opinion polls and in nicknames such as the German word "teuro" -- a contraction of the German word for "expensive" and the name of the currency. As a result, Slovenia began double-labelling of prices in March and will keep the labels for months after the switch to the euro, so consumers can compare prices especially for everyday household goods.
DANGEROUS NICHE
"This is a dangerous niche because one euro is worth 239 tolars. It doesn't convert easily and it's very easy to make prices look better (by rounding them up)," Jansa said. The European Commission urged Slovenia in a report last month to do more to convince consumers that prices would not rise because of the changeover. The prime minister said the government had sought to involve business in price transparency to avoid nasty surprises. "If you walk down the streets in Ljubljana you'll see ads where supermarkets and companies are promising that after the euro in our shops nothing will be more expensive," he said.
Asked whether he was worried about creeping inflation due to the euro, he said: "Some increases are unavoidable, for instance for parking. It's almost impossible not to do. "But this won't have a practical effect on the inflation rate or the quality of life. We've invested a lot of effort." Jansa rebuffed criticism that his centre-right government, which set out to radically overhaul the Slovenian economy with tax cuts, privatisation and labour market liberalisation, was behaving timidly in practice. He claimed credit for enacting the first significant tax cuts in Slovenia's 15 years since independence, and vowed that privatisation of telecoms, energy, banks and insurance would go ahead after a legal framework was established this year. "We're on track. We didn't promise we'd do it overnight," he said, citing a need to liberalise the telecommunications market before privatising what was a virtual state monopoly. The government would keep a 25 percent stake in operator Telekom temporarily because of political sensitivity but would not interfere with business decisions, he added.
Paul Taylor, Reuters Brussels
