Caretaker cabinet’s plan to adopt euro in 2016 could meet indifference of future government

The Czech Finance Ministry has outlined an ambitious plan to meet all the criteria for adopting the common European currency. If all goes well, the euro could replace the Czech crown by 2016. But adopting the euro is evidently no longer a priority for the Czech politicians who will replace the current caretaker cabinet after elections in May.

The year 2016 could see the Czech Republic adopt the common European currency, according to a plan compiled by the Czech Finance Ministry. In an annual report on the country’s euro convergence programme, the Finance Ministry proposes, among other things, lowering the state budget deficit below three percent of the gross domestic product by 2013, from the current 6.6 percent. If this happens, the country would likely meet all the euro adoption criteria three years later. But columnist for the weekly Respekt Jan Macháček points out the plan is hardly more than wishful thinking.

“This programme is announced by the provisional, caretaker government. So it’s only technically relevant. Whether it’s also politically relevant we will see after the general election. Another issue is that everything really depends on the economic growth and the current prognoses are very uncertain.”

Should the Czech Republic aim for the adoption of the euro by 2016, the necessary measures would also involve drastic cuts in the social welfare system, cutting the costs of the state bureaucracy – and a sharp rise in taxes. These steps might be much easier to take for the current caretaker government than for a political cabinet that will take office after the next general elections scheduled for May 2010. And Czech politicians have shifted the euro much lower on their lists of priorities, says Jan Macháček.

“The landscape has changed quite dramatically over the past year, I would say. The Social Democrats, who were quite enthusiastic about the euro and all things European, changed their rhetoric, and now their support for the euro is very calm. They have realized that to adopt the euro, the country would have to undergo some radical changes and in particular cuts in the social welfare system, which would be unpopular. So the Social Democrats are no longer such enthusiastic supports of the euro adoption.”

Some experts also note that even if the next government manages to improve the public finances, it will have to deal with other pressing issues first. These include thorough reforms of the country’s health care as well as welfare and pension system.