_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ narodna banka slovenska communication section opening remarks by mr jozef makuch, governor of narodna banka slovenska at the conference 10 years of the €uro in slovakia international conference to mark the 10th anniversary of the introduction of the euro in slovakia bratislava, 11 january 2019 dear deputy prime minister kazimir, dear mr mersch, our honoured guest from the ecb executive board, dear governors, ladies and gentlemen, it is my great pleasure to welcome so many distinguished guests to this conference, organised to mark the 10th anniversary of euro adoption in slovakia. ten years ago, when we were just switching to the euro, or even 15 years ago, when we started preparing for euro accession, we believed this would be the pinnacle of our integration process. we were coming from a small emerging market economy with volatile capital flows and unexpected foreign exchange pressures. we were looking forward to becoming part of the world ’ s largest economy and the second most important global currency. it turns out we have got both more and less than we expected. on the one hand, we got not only a monetary union, but also a banking union, soon a capital markets union, and to some degree also a fiscal union. ten years after our euro area entry, and ten years after the outbreak of the global financial crisis, the european monetary union is more complete than ever but still needs a lot of work. i am sure many of our distinguished speakers will be discussing what needs to be done to bring it to completion. narodna banka slovenska, imricha karvasa 1, 813 25 bratislava, slovak republic www. nbs. sk on the other hand, we also got less from the changeover than we hoped. no matter how happy the wedding, there will always be rough patches in the marriage : every union requires constant efforts from the partners to function well. the debt crisis in some euro area countries has shown us that the euro is still vulnerable to shocks. from a domestic perspective, not all the expected benefits of the euro have fully materialised. one reason is that the crisis slowed our convergence towards the most developed economies. another reason is that the global

performance of consumer spending. there is no doubt that there has been much to hold consumption back. employment and wage growth have been modest. high and volatile oil prices have had a dampening influence. in addition, savings levels have remained high, reflecting concerns, not only in relation to labour markets, but also about longer - term prospects for health - care and pension systems. thirdly, until recently, the corporate sector in the euro area has been engaged in a period of balance sheet restructuring, in response to the sharp rise in corporate debt which occurred as part of the late 1990s dotcom boom. a further problem has been the existence of significant structural rigidities in euro area labour and product markets, which are seen by many as holding back growth in the euro area economy. not surprisingly, given this background, economic recovery in the euro area was slow to take off in recent years. the problem was that the normal sequence of recovery, which tends to run, first, from a pick up in export growth, then to a recovery in investment and, finally, on to a strengthening of consumer spending, was not operating. while the external engine was firing strongly, the domestic engine was not. more recently, however, developments have become more encouraging. following four quarters of moderate growth between mid - 2004 and mid - 2005, there are signs that euro area growth is gathering some momentum. while quarterly growth rates were somewhat volatile in the second - half of last year, looking through these short - term fluctuations, the evidence suggests that economic activity is improving. of course, external trade continues to provide significant impetus to growth in the euro area. however, there are now also some signs of an improvement in domestic demand. business confidence has strengthened significantly since last summer, contributing to a welcome recovery in investment. the improvement in investment reflects not only the favourable external stimulus, but also the impact of improved business balance sheets and efficiencies, as well as rising profitability. however, progress remains slow in relation to consumer spending – the main element of domestic demand. while consumer confidence has picked up in recent months, consumer spending growth remains subdued, though there are one or two signs of improvement. looking ahead, the view of the governing council is that the conditions remain in place for ongoing economic expansion in the euro area. a favourable external environment should continue to provide support for exports. investment should also benefit from what are still very favourable financing conditions, improved business balance sheets and gains in corporate earnings. on the consumer side,