Elena Kohutikova – Slovakia’s Mrs Euro

Elena Kohutikova

“The Euro is for me a signal that the country has grown up.”

On 1 January 2009 Slovakia joined the Eurozone as the first new EU member state from the former Soviet bloc. If any doubts were left, this achievement banished once and for all Slovakia’s image as a laggard and latecomer.

One of the leading figures behind the introduction of the Euro is Elena Kohutikova, a tall blond woman in her 50s with a cheerful laugh. Having worked on Slovakia’s conversion to the euro as Vice-Governor of the National Bank of Slovakia until 2006, holding the first Slovak Euro coins in her hands was the final step of a long process.

“The introduction of the Euro was a special moment for me because I think that I felt for the first time in my life that my dream was fulfilled and I am now a 100 percent European woman.”

Elena Kohutikova now has her office on the 22nd floor of the main building of VUB Banka, one of the three largest commercial banks of Slovakia. After serving two mandates on the board of the Slovak National Bank, she left the Bank and became Director of the Financial and Capital Markets Division of VUB Bank and later also deputy CEO. She was in charge of the euro introduction at VUB, and personally answered the bank’s euro hotline. During the busiest period, she even slept at the bank (see photo above).

Elena Kohutikova was born into a very different world. She grew up in the communist countryside near Trnava in Western Slovakia. After graduating in economics at Bratislava University, where she met her future husband, they moved to Dubnica where both worked for ZTS, a socialist engineering company. In 1982 they moved to Bratislava, where Elena found a job as a researcher at the Institute for Economics and the Slovak Academy of Sciences. She remained there until the fall of communism.

“I was extremely happy when the system changed. In 1989 I started to live. It means I started my professional life when I was 36 … It was the first time that I felt that my work made sense, that we can really do something. We were free to travel. My children would have a life very different from mine.

I lived in a different regime. You didn’t have a lot of information … I majored in monetary policy at the university, but not real monetary policy, because you could not mention money. I did my PhD without being allowed to mention money and the role of money.”

In 1989, the role of money changed, not only in academia, but – much more importantly – in practical life. Prices were liberalised, and initially life became harsher as the transition economy nosedived. Having lost her husband in a car accident five years earlier, Kohutikova had to raise her two daughters, in 1989 aged 9 and 12, as a single-parent while pursuing a demanding job.

In 1990, she joined the Bratislava branch of the Czechoslovak national bank. With the breakup of the federal state looming, she became a member of the preparatory team for the establishment of the Slovak National Bank and the introduction of a new currency, the Slovak crown. She was appointed director of the new Bank’s economic division.

“The [Slovak] crown was introduced without any great preparation. We did not have a Central Bank, we were here only a branch of the Czechoslovak National Bank. We had never practiced monetary policy, we had never managed foreign exchange. Enthusiasm helped replace the knowledge and experience we did not have.

Nobody trusted the new currency. Money left the country to the Czech Republic before the split. I remember forecasts that the exchange rate would drop soon to 1:4 against the Czech crown.”

Eventually the Slovak crown did much better than most expected. After a turbulent start, the new currency stabilised at an exchange rate of 1:1.2 to the Czech crown. But the economy as a whole did not do well under the Meciar governments. Democratic freedoms gained in 1989 were again under threat until the government changed in 1998.

Kohutikova sees the first major turning point in Slovakia’s economy in May 1999, when the new reform coalition led by Mikulas Dzurinda passed a package of austerity measures to restructure the economy, including public finance reform and the privatisation of the banking sector. Later this was followed by ambitious reform packages on tax, health care, pensions and the social sector. “Without these reforms we would not have the Euro now”, Kohutikova claims.

“In 2002, we decided in the bank board that we should try to find an answer to the question when to join the Euro area. This is a political decision, but we thought we should provide some factual analysis and make a proposal …”

The National Bank prepared a strategy with the Ministry of Finance, proposing a target date of 2008/2009. The main argument for an early entry into the Euro area was Slovakia’s very open economy, with trade amounting to some 170 percent of GDP. Under these conditions, monetary policy would be of limited effectiveness in the event of a serious crisis, making it far safer to belong to the Euro zone. In 2004, the final strategy was adopted by the government with 1 January 2009 as the target date.

“[Then prime minister] Dzurinda was very important for this. He knew that to implement the strategy they had to finish the reforms, that there was no time to relax. I don’t know if Dzurinda understood that because of these tough reforms his coalition could loose the elections.”

Indeed Prime Minister Dzurinda ended up on the opposition bench after the 2006 parliamentary elections, but the Euro was nonetheless introduced on 1 January 2009.

“I don’t know how to evaluate the performance under the Euro 11 months after its introduction, but I know that the Euro considerably influenced our development in the three to four years before the actual introduction of the Euro. When people ask what the benefit of the Euro is for Slovakia, I say: this!”

Kohutikova points to a chart comparing the GDP per capita of the Visegrad countries as a percentage of the Euro area:

Source: Eurostat, VUB Banka

Between 2004 and 2008 Slovakia managed to overtake Hungary and narrow the gap to front runner Czech Republic from 18 to 8 percentage points.

For Elena Kohutikova, who is still called by Bratislava insiders “Mrs. Euro”, the whole process of entering the euro zone carried a deeper message about the country and its extraordinary transformation in the last two decades.

“What was special in this situation was not only the currency, the euro. Until the Euro story, we were catching up not only to the EU but also to our ex-communist neighbours. In the integration process Slovakia was behind for a very long time. We were 5 years later in the OECD, we were 5 years later in NATO, we only just made it at the same time into the European Union. That was the first positive signal. But with the Euro, we are the first. That means now we can repay our debt to our neighbouring countries. Now they can learn from our experience.

It’s something which made me very happy, because for the first time in 20 years Slovakia showed that is able to do something by itself … The euro for me is a signal that the country has grown up.”

29 December 2009