Jan. 1 (Bloomberg) -- Slovakia became the 16th nation to join the euro region, after record advances in economic growth and the koruna helped the eastern European country qualify to adopt the common currency.

Fireworks set off at midnight glittered over the Danube River in the Slovak capital Bratislava following a countdown at Hlavne Namestie, the main square in the old town where thousands of Slovaks gathered for an all-night rock concert.

Slovakia, which joined the European Union in 2004, is the second former communist nation to complete the switch after Slovenia. It passed up Hungary, Poland and the Czech Republic into the euro zone at a time other candidates are scrambling to make the change to shield themselves from the brunt of the worldwide financial crisis.

“We are waving goodbye to the Slovak currency, to which we have become strongly emotionally attached,” said Prime Minister Robert Fico, who withdrew 100 euros ($140) from an ATM bank machine in the Parliament building. “At the time of the current global crisis” the euro “is a psychological tool for Slovaks to boost their self-confidence.”

By 2 p.m., 96 percent of the country’s 2,258 ATMs dispensed euros, Central bank Governor Ivan Sramko, who joins the European Central Bank, said at a press conference.

Using Koruna

Still, at the main Bratislava train station, the koruna continued to be the tender of choice. Coffee machines had yet to be reset to accept euros and customers preferred to pay with the Slovak currency, sellers said. Euro payments were less than one- fifth of total business so far, said 51-year-old Amalia, a snack- shop employee at the station who declined to say her last name.

“People are starting to pay with euros, but mostly it’s korunas they want to get rid off,” she said.

Slovakia completed its transition into western Europe’s economy faster than its neighbors because the record strength of the koruna capped import prices, keeping inflation below the euro- adoption limits. At the same time, its budget deficit was kept under control because of increased revenue from economic growth.

Gross domestic product expanded a record 14.3 percent in the fourth quarter of 2007 and grew an annual 7 percent in last year’s third quarter. The global crisis will slow growth to 4 percent this year, the Paris-based Organization for Economic Cooperation and Development said on Nov. 25, still faster than the projected 2.5 percent rate for the Czechs, 3 percent for Poland and a recession for Hungary.

EU Response

“I congratulate Slovakia and warmly welcome all its citizens in the euro area,” said European Commission President Jose Manuel Barroso in a statement released by his Brussels office today. “The euro will help Slovakia to take part in, and benefit from, Europe’s collective effort to recover from the current economic crisis.”

As the global turmoil took hold in the autumn, the Slovak koruna remained locked to the euro in preparation for the Jan. 1 changeover. By contrast, the Polish zloty lost 24 percent, the Czech koruna dropped 11 percent and the Hungarian forint fell 13 percent in the second half of last year. The Slovak currency was converted at a rate of 30.126 against the euro, an 11 percent appreciation from a year ago.

“Especially at times of a crisis, it becomes apparent that national currencies are not able to cope with market turmoil,” said Finance Minister Jan Pociatek. The euro “serves as a protective shield.”

Euro adoption has also protected Cyprus, an eastern Mediterranean island, against the effect of the global crisis since it dropped the Cypriot pound for the euro 12 months ago, said Athanasios Orphanides, the head of the central bank and another member of the ECB executive council, in an e-mailed statement yesterday.

‘Buffer’ Currency

The euro is clearly a buffer against the financial stress we’ve had,” agreed Elizabeth Gruie, a currency strategist at BNP Paribas SA in London.

At Hviezdoslavovo Namestie, in the heart of Bratislava, Robert Poor, a 27-year-old graphic designer, was gearing up for the celebration before midnight yesterday, carrying a packet of euro coins he received as a Christmas present.

“I have my euros with me and I will certainly use them tonight,” said Poor.

Unlike the neighboring Czech Republic, once a federal partner in defunct Czechoslovakia, Slovakia decided that quick euro adoption will benefit the population and the economy. Czech Prime Minister Mirek Topolanek said today that his government will set a euro-adoption date on Nov. 1.

Investor Potential

Meanwhile, the Slovak administration is negotiating with six investors to spend at least 5 billion koruna ($237 million) each to build factories in Slovakia, Economy Minister Lubomir Jahnatek, 54, said on Dec. 16.

Volkswagen AG, Europe’s largest carmaker, cited the switch as a key reason for choosing to upgrade its Slovak factory and prepare it for a new car model, Jahnatek said. The German carmaker originally planned to put the project in the Czech Republic.

In the San Marten restaurant near Hviezdoslavovo Namestie, 33-year-old translator Kamil Peteraj pulled out a 10-euro note and ordered a glass of white wine.

“Here we go,” he said.

Slovakia may be the last to join the ECB board for some years as the Frankfurt-based institution may be more wary about widening the euro region for now.

Euro-Region Test

Executive board members, including Juergen Stark, say the current monetary union is being tested by the financial meltdown and are concerned that many new members, who founded free-market systems starting in 1989, have yet to prove they have stable- enough economic development, economists say.

“The political case for euro entry may have strengthened in the context of the current crisis, but the economic obstacles to joining have not gone away,” said Audrey Childe-Freeman, a senior currency analyst with Brown Brothers Harriman & Co. in London.

Poland will probably be the next country to make the switch, in 2012, said Juraj Kotian, the chief central European economist at Erste Bank AG in Vienna. It may be followed by Hungary, helped by a bailout package from the International Monetary Fund last year.

To contact the reporters on this story: Andrea Dudikova in Prague at adudikova@bloomberg.net; Radoslav Tomek in Bratislava at rtomek@bloomberg.net.

Last Updated: January 1, 2009 09:09 EST