EU must play fairly on Slovak euro entry bid: PM

BRATISLAVA (Reuters) - Slovakia wants the European Union to drop the double standards it has practiced in the past and is seeking fair treatment next year when the EU assesses its bid to adopt the euro in 2009, Prime Minister Robert Fico said.

Speaking at a rare meeting with foreign media late on Tuesday, the leftist Fico promised to extend welfare policies, but said a prudent fiscal stance to ensure euro adoption was a bigger priority.

Fico has had to postpone many promises that helped him to win elections last year because he must cut the fiscal deficit to below 3.0 percent of gross domestic product in 2007 and reduce it further in the next few years to adopt the euro.

"The euro plan looks very promising, providing no one will come up with some political criteria for entry, because this government will thoroughly fulfill all financial and economic criteria," Fico said.

Fico, who has expressed fears that a political decision by the EU could prevent Slovakia from adopting the euro in 2009, said he believed Brussels would not discriminate against Bratislava when it meets all the Maastricht criteria for euro zone entry.

"Double standards are typical for Europe ... It is much more difficult for a small country to pursue its interests in Europe than for bigger countries," Fico said.

"We want to meet the Maastricht criteria, that is our commitment, and we expect a fair game. I would consider it a fair game if introduction of the euro is allowed in January 2009 when the criteria are met."

Fico protested earlier this year about a European Central Bank memo that said the disinflation process in Slovakia may not be sustainable, and that the government should cut the budget gap faster.

Slovakia's economic growth is expected to beat last year's record of 8.3 percent in 2007, and this will help the government to cut the key public finance deficit to 2.7 percent of GDP. It plans to reduce the gap further to 2.3 percent of GDP in 2008.

Some analysts fear the cabinet would take a looser fiscal stance after euro adoption because 2010 is an election year.

But Fico said he would adhere to EU's Stability and Growth Pact that requires continued fiscal deficit reduction after Slovakia joins the common currency area.

GOVERNMENT MAGIC

"We know that fiscal discipline is extremely important for this state, and social measures, such as raising payments for the first child, or lowering the VAT tax on some commodities, will in no way endanger financial discipline," Fico said.

"That is the magic of this government. We are building a welfare state, we are restoring social justice, and at the same time we are fulfilling the Maastricht criteria."

Fico has backed down from pre-election promises to raise taxes for rich Slovaks and companies, but still angered businesses with laws strengthening the position of employees, boosting trade union rights and raising payroll taxes.

Foreign and local companies have said government policies threaten Slovakia's competitiveness and could hinder future economic growth.

But Fico rebuffed such criticism, saying the flat 19 percent tax rate and absence of any tax on dividends made Slovakia an attractive business location.

"We have to look at developed Europe. Slovakia's aim cannot be capitalism 'made in USA'," Fico said. "Slovakia is in Europe, and its goal must be a European-type of social state."