1st February 2016

Euro in Czech Republic: It could take 5 years for Government to decide

In an interview for the ceskapozice.lidovky.cz server, the (likely) next Czech Central Bank Governor Jiří Rusnok expresses his views on policies related to currency intervention, euro adoption, interest rates and regulation of the Czech financial sector. "From the point of view of Eurozone entry, the Czech National Bank is just a service organization. If the Government decides to adopt Euro, we will have to follow the suit", adding that his guess is that the ministers will not make such a decision in the next five years. However, Oldřch Dědek, the government co-ordinator for euro adoption and former board member of the Czech central bank maintains that the central bank should take active part in the process and explain benefits of the common currency adoption, Česká pozice writes. 

In terms of economy, the Czech Republic is ready for adoption of the common currency, said European Commission's Vice-President for Euro & Social Dialogue Valdis Dombrovskis at the conference Adoption of common currency - benefits and risks held on 29 January 2016 in Prague Details are available here. The outlook for the economy is positive. The Commissioner recommended the government to work on the long-term sustainability of the social and health care systems, improve tax collection and labor market policies (participation of women in the labor market). 

If the Czech Republic switches to the common European currency it would pay CZK 34 billion into the European Stabilisation Mechanism, around half a percent of gross domestic product, said the state secretary for European Affairs, Tomáš Prouza. The senior official also said that the country fulfilled the criteria for euro adoption much better today than it did 11 years ago. His comments were echoed by MEP and former vice-governor of the Czech National Bank Luděk Niedermayer, who said few countries were as well prepared for joining the Eurozone, Radio Prague wrote.

Also, the Sobotka government has repeatedly declared that it would not set a target date for euro adoption during its term in office, Radio Prague adds. In an article by ihned.cz, President of the Confederation of Industry and Trade of the Czech Republic Jaroslav Hanák says that the discussion about the date for euro adoption could begin as late as in 2019. Read his speech. President of the Czech-Moravian Confederation of Trade Unions Josef Středula said that in reality, convergence of the Czech Republic to the level of (prosperous) EU member states is not happening. State Secretary Prouza also pointed to the low quality of public debate on euro. 

Read PM Sobotka's speech, saying that two-thirds of Czech export flows into the EU and 80% of foreign investment flows come from the EU, and admitting that Euro is a political project.

The current Czech Central Bank Governor Miroslav Singer believes that the Czech economy is not yet sufficiently harmonised with the euro zone, the Czech News Agency wrote. Before the crisis, Eurozone 19 and countries out of the Euro area shared similar trend of development. After the crisis, the latter group grew faster (2.3% average year-on-year GDP growth in 1999-2014, compared with 1.3% growth of Eurozone in the same period), Central Governor Singer said in his presentation, adding that the Eurozone memberhip as such does not provide an automatic mechanism for convergence. The convergence comes as a result of economic policies implemented before and after the Euro adoption. More in an article by e15.cz.

More details about the conference.

Read also an articke by Radio Prague Czech euro enthusiasts fear delay will make adoption a lot more difficult.


Globally, OECD's Composite leading indicators (CLIs), designed to anticipate turning points in economic activity relative to trend, continue to signal a mixed outlook across major emerging economies and stable growth momentum in
the OECD area. Read more.




Members of the American Chamber of Commerce in the Czech Republic