The European Commission urged Slovakia Wednesday to be ready to tighten fiscal policy in response to any hike in inflation.
However the commission, in an assessment of Slovakia’s latest economic convergence programme for the 2007-2010 period, said that Bratislava’s plans appeared right to correct its excessive budget deficit from last year. "Slovakia’s planned budgetary consolidation is consistent with a correction of the excessive deficit in 2007," EU Economic and Monetary Affairs Commissioner Joaquin Almunia said in a statement.
"But looking beyond the correction of the excessive deficit, faster progress towards the medium-term objective is advised, in particular to contain possible inflationary pressures," he said.
Slovakia ended 2007 with a budget deficit of 23.53 billion koruna (702 million euros, 1.02 billion dollars), more than a third below the original target.
Annual inflation climbed to 3.4 percent in December from 3.1 percent in November, according to official figures.
Holding the rate of inflation to less than 3.0 percent is a condition for Slovakia to adopt the euro single currency, which it hopes to do at the start of 2009.
"Slovakia is advised to stand ready to adopt a tighter fiscal stance, in particular in view of possible inflationary pressures after the disinflationary effect of past exchange rate appreciation fades out," the commission said.