Distrito Central de Beirut

Vysoká škola v Sládkovičove, Slovenská republika

Abstract: After implementation of Euro exchange different, transactional and different administrative costs have been removed what signals expectation of even better connection of Slovakia with the Euro zone markets. Exactly the euro-zone countries belong to our most important business partners. From the investors´ point of view, Slovakia currently voids of higher quality infrastructure and better atmosphere in business environment. A big development potential is visible in services. In connection with a high rate of car and electrotechnical industries a lot is spoken about a higher level of diversification in the industry. It is necessary to perceive the Euro stability from a long period as an advantage to attract investors.

Key words: Euro, investments, economic growth, economy, economic depreciation, unemployment

1. CONSEQUENCES OF CRISIS IN EUROPEAM UNION

Within the EU crisis has shown the differences in attitudes between the east and south. We could conclude it this way: Once we will be more strict what concerns the east than we were once more benevolent towards the south. In Paris, the idea, that France could face the crisis thanks to the important role of state in economics while the countries in the east were influenced the most and sank under the siren of economic liberalism, prevails. States of Central Europe can bear up against the crisis better than western countries. The most important country of this region, Poland, is the only one in the EU, which is not in recession (growth 1.5 per cent in the year 2009). The crisis falls on this region which is not responsible for it.

Inspite of that there is a group of countries, mainly Hungary and Latvia which after the weakening of currencies, cannot repay Austrian and Scandinavian loans in euro. These countries searched for help in the International Monetary Fund and have accepted the drastic economy measures in the extent which is not in the west and mainly in the south probable. While there were speeches about the misfortune in the east, the problem was in the south. It did not refer only to liberalism but also to the debts of states. It seems to be shocking that financial rings saved by massive interventions of states now attack the states considered to be vulnarable.

It is logical that in eurozone they take care of their members who face problems more than of the potential candidates for the entrance. It is not very wise to decrease the deficits in the time of recession. However, over different perception and crisis of euro one issue seems to be evident: criteria for future candidates for implementation of euro will be the more strict, the less they were respected by the countries in the south. And mainly the expansion of eurozone towards the east will rely on the precious recovery of debts in the south. [1]

New strategy of European Union, Europe 2020, is waiting according to Slovak Prime Minister Robert Fico the same fate as its previous Lisabon strategy, which was after the negotiation of European Council labeled as big failure. Conclusions of the 2- day summit of European Union to this agenda should contain 5 points. Mainly, it is the question of employment, question of expenses for science and research, then certain goals in the area of emission limits, question of education and finaly, there was much discussion on criteria of poverty. New member states stressed a lot cohesion, which enables the development towards future. They emphasized energetic safety and Treaty on growth and stability. All three conditions were implemented into documents.

As an example of non- fulfilled expactations Slovak Prime minister mentioned investitions to science and research which should achieve the level of 3 %. However, we know that in Slovakia in the year 2015 we will have the level around 1.8 or 1.9 %. (GDP).

On the other hand, the prime minister welcomes that the goals stated in the document shall apply for whole EU and each member state will have right to define its own national programmes, which can be different from the goals of EU. He emphasized the paradox of the document, which on one hand has ambitious goals but in the first paragraph states that „ in the last two years we have been facing the worst economic crisis since the thirties of the last century.“ Text speaks about the slow structural growth, high unemployment and over - debting at 80 %. In Slovakia it is at 39 %.[2]

2. GREEK DEBT

Greek debt has reached 300 miliards of euro. To compare this, Slovak debt is 27.5 miliards of euro. The number of Greek citizens is twice more than of Slovaks. Per capita, the Greeks are 6 more times in debts than Slovaks. On paper, their life standard is better than ours. They had life standard higher thanks to high debts. They will have to pay it back with interests, it means they will have to work hard. Will they be able to do this? They produce yearly less than their debt is. 40 % of GDP is created by state expenses what means no production. Greece was from a certain point of view relatively prosperous country. They became a part of EU, adopted euro and were considered to be the standard European country. Now, they would be on the level of developing world. They got there on behalf of others- those who helped them and sent them euro funds. Now, when the situation is bad, not only Greeks have problem but others have problems as well. Greeks do not have money to pay for loans and they request for other money (the best for non- recourse loans). They cannot practically offer the value – They do not have developed industry and sea transport and tourism is going down. Crisis disclosed gigantic problem that is spread out on other countries using Euro. And Euro can function only when the rules are adhered strictly, debts are kept at stay and economics produce real value. And Greece is not the only country that has problems like this.

3. NEXT OVERFLOW OF ECONOMICS

On the other hand, the western Europe does not have liberal rules and economics cannot clean itself. What has happened? The financial crisis has come nad banks and firms are having problems. Consequently, the states to a great extent covered their problems (scrapping, saving of banks, a help to chosen firms). However, states were not properly in debts before, so with these measures the debts have increased. After Greece, the other states will have problems - first the states in the south and then it will continue towards the north. Money from different saving parcels will be slowly used by firms and they will have to search for radical rationalization measures. First companies that will fire employees will be car producers, first companies will be Fiat and Opel. Knowing facts one does not have to be a magician to know where all this will finish. The better question is When. We can assume that next overflow of economics will come at the end of this summer. [3]

4. EURO IN SLOVAKIA

Implementation of euro caused that in Slovakia we removed exchange- rate, transactional and other administrative costs thanks to what one can expect better connection of Slovakia with other markets in eurozone. The countries of eurozone belong to the most important business partners. Slovakia from the point of view of investors misses the high- quality infrastructure and better atmosphere in the entrepreneur´s area. Big potential can be seen in the area of services. In connection with the high rate of car and electro-technical industry, it is spoken a lot about higher degree of diversification in industry. The motor of high increase of the Slovak economy in the time before the global economy crisis was car and electro-technical industry. Besides these branches of industry one cannot forget small investment projects.

Investment in general contributes to the decrease of unemployment, growth of life standard and consumption what concerns of households. It attracts and opens place for new investors, mainly from the area of services. Consequently, big foreign investors create space for the arrival and for the development of smaller entrepreneurs aimed at services, even from domestic area.

Holland, Austria and Germany, belong to the countries which invested the most. Their contribution on whole direct foreign investment since the rise of the Slovak republic represents more than half. Among other important investors in Slovakia belong from the long-term point of view, investors from the Czech Republic, Italy, Hungary or Cyprus. Absolute majority, more than 85 % from the whole direct foreign investment has been allocated in Slovakia in enterprises, the rest in bank sector. The most important financial bulks have been invested to industrial production, mainly production of cars and electronics, energetic industry and financial services. Interesting investment have been done in the area of trade, transport or communication. From the regional point of view, two thirds of foreign investments have been placed in Bratislava region and on contrary nearly one per cent in Prešov region.[4]

The economics in Slovakia since its beginnings has never had such a sharp fall like last year, when ten thousands of people lost their jobs. This is a worse part of messages from the Statistic Office. More detailed view to its numbers was from the last months of the year. It showed that thanks to industry, the economics has slowly started to recovered. The growth of unemployment has been slower as well. In the last quarter we had the second highest economic growth in Union. It changes the whole fall of economics.

When we compare this situation with the Czech republic, during the whole year we had worse numbers. Czech economics fell about 4.3 per cent and the Slovak economics about 4.9 per cent. At the beginning of the last year our economic had sharp fall, one of the deepest in Union. The end of the year however, was better. What can be seen behind the last year fall, it is crisis thanks to which foreign countries bought fewer goods than 2 years ago. EU fell down about

4.1 per cent.

This year we should grow. Ministry of finance estimates about 2.8 per cent, what is twice more than in the Czech republic. What should help us should be the construction of new roads. The fall of economics was accompanied by freezing of salaries and big firing. More than 100,000 people lost their jobs and their income radically decreased. The employment was decreased about more than 4 per cent, i.e. more than in history. There are about 350,000 people without work nowadays. In this year, the economics should grow, but real salaries shall according to the ministry of finance fall. There will be more unemployed people. The more we have them, the more certainty will be lost. Industry nowadays produces about 7 per cent less than before crisis, it employs about 21 per cent less. It infers, that employees are more employed and firms react for revitaling of production with delay. Improvement will not come so early. Unemployment will fall very slowly. It will take several years to get into position we had in the year 2008, when the crisis just started. [5]

The year 2009 can be called the year of crisis, After hypothecary bubble in America, it was brought to old continent as well. It reached mostly the labour market. People started losing their jobs. Profit of companies according to statistics fell about 30 per cent. The number of unemployed was higher than 324,000. Anger, poverty and sour. These are consequences of crisis for many people. And there were not only unclever and lazy people. Moreover, it is not sure, whether this year will not be later called the year of crisis. It is visible, that crisis has brought the truth. It was born from over- production. Factories in their expectations created so big capacities that they were made redundant. Simply said, they wanted to produce so much and such products that in normal conditions no one would want. The world is full of companies which are not needed.

Is then capitalism the system which can bring prosperity? If the world economics wants to be prosperous, the countries should aim at what they can manage easily and remove with cooperation of other insufficiences. Politicians should take the steps that will have longer and better results. Slovak government should concentrate on innovation and development of science and education. Educated people should not get lost. Because only they can understand the fact that capitalism is not easy, but all the other systems have failed. Only an educated man can find something what is better than capitalism. Something less utopian? [6]

Financial wealth of the Slovak households inspite of the economic crisis is going up. Households in the last year started to consume less and cumulate savings, which were higher in comparison with the year 2008. It comes up from the analysis of UniCredit Bank, according to which the income of households last year went down but the households restricted their consumption. One of the motives of such behaviour is the reality that the Slovaks do not like loans and debts. Households in Slovakia are nowadays more careful in spending Money and therefore they cumulate savings in spite of the growing unemployment.

The reality that the Slovaks do not like debts and long-term unemployment caused that the financial wealth of households in the last year reached 59 % of gross domestic product (GDP), what is least in comparison with other states of V4. Analysts however alert that in this evaluation we need to take into consideration the non-financial wealth represented by real property. Slovaks have more wealth in non-financial property. Citizens of Slovakia possess according to the data from the year 2001 more than 16 % of flats than in western Europe and about 40 % more than as e.g. in the Czech republic. Rate of own residing reached in the mentioned year 66 %, while the average of western Europe was 57 %. With the gradual growth of the standard of living in Slovakia should, according to Ján Tóth, increase the financial wealth. We do not expect the dramatic changes in behaviour of households.

However, analysts warn that the Slovaks have in comparison with other countries less savings but on the other hand they have fewer debts. Liabilities of the households in Slovakia reached last year in Slovakia on average only 22 % of GDP, while the average of the western Europe is 59 % GDP. Slovaks still use few financial products and they keep too big portion of financial wealth in cash and bank deposits. We do not have too many share funds- Slovaks according to the analysis use more expensive consumer credits and fewer loans.[7]

5. CONCLUSION

In spite of the temporary competitive advantage of the neighbouring countries at weakening of their currencies last year, it is necessary to perceive the euro from the long-term perspective as the advantage when getting investors. High fluctuation of currencies of the neighbouring countries can be the certain symbol of unsteadiness and the negativity for investors when considering the entrance to a given country. Investor can secure himself against the fluctuation of currency, but this securing means higher costs.

LITERATURE

[1] Európska únia je spolok nerovných. Dostupný z WWW: <http://finweb.hnonline.sk>. [2] Podľa premiéra skončí Európa 2020 fiaskom. Dostupný z WWW: <http://hnonline.sk> [3] Kríza udrela na štáty – Pôjdeme z kopca. Dostupný z WWW: <http://blog.etrend.sk> [4] Dane a euro sú našimi výhodami. Dostupný z WWW: <http://finweb.hnonline.sk> [5] Ekonomika padla, ale začína rásť. Dostupný z WWW: <http://ekonomika.sme.sk> [6] Zdochni kapitalizmus? Dostupný z WWW: <http://hnonline.sk>

[7] Finančné bohatstvo Slovákov napriek kríze rastie. Dostupný z WWW: http://ekonomika.aktuality.sk

ADRESS:

Dr.h.c. doc. JUDr. Alena Pauličková, PhD. Vysoká škola v Sládkovičove,

Slovenská republika,