RPT-FEATURE-Slovaks find downside of eurozone

* Euro is strong shield but also has drawbacks

* Slovak firms suffering due to euro adoption

* Labour costs up by more than 50 pct since 2005

* Case serves as example to other euro zone aspirants

By Martin Santa

KRALOVSKY CHLMEC, Slovakia, Nov 11 (Reuters) - When Slovakia adopted the euro in January, Alexander Joszay loved driving across the border to Hungary, where financial crisis had weakened the forint to deliver lower prices for euro-earners.

But the factory where the 58-year-old maintenance man worked liked the idea too. It sacked Joszay and other Slovaks a few months later and moved across the border.

"There was not just the single positive thing of people taking advantage of the exchange rate," said Joszay, who worked for car parts firm MBE in this eastern Slovak town.

"People also lost work after the employers told them it was no longer profitable to continue with production."

Slovakia's case underscores the euro's double-edged nature for the European Union's ex-communist countries and serves as a warning for Poland, Estonia, Bulgaria and other states who see the stability of the single currency as a panacea for crisis.

Slovakia attracted billions of euros in foreign investment to become the world's largest producer of cars per capita, but the country of 5.4 million people depends on autos and electronics for more than half its exports.

Opponents of quick euro adoption have long argued that losing the flexibility of an independent currency could be painful for economies whose cyclical endurance is limited by lower productivity or limited diversification.

"Policy-makers in general envy Slovakia for entering the euro zone because they are scared of currency volatility. The euro provides stability in this sense," said Lars Christensen, head of emerging markets research at Danske Bank.

"But it takes away the flexibility, and it is clear that Slovakia is suffering in terms of loss of competitiveness," he added.

The euro has helped Slovakia be perceived as a better credit than others in the region: its 10-year benchmark bond yield is now 97 basis points over the euro zone's benchmark German bund, much tighter than Poland's 285 and Hungary's 403 points.