Czech firms increasingly doing business with each other in euros

Photo: Ondřej Tomšů

Despite the Czech government having no target date for adoption of the common European currency, an increasing number of Czech companies are using the Euro among themselves. According to data released by the Czech Chamber of Commerce, more than a fifth of all payments to domestic suppliers are now carried out in euros.

Jan Bureš | Photo: Tomáš Adamec,  Czech Radio
I discussed the trend with economist Jan Bureš of Patria Finance:

“I think it is partly a policy of bigger companies that try to hedge their open foreign exchange positions. When they export goods and services and they get euros for it that they ultimately want to use euros also to pay for the supplies, so they at least partly get rid of the exchange rate risk.

“Besides that what we also see on the market is a growing tendency of Czech corporates to take foreign exchange loans in euros. That’s also a strategy how to hedge themselves against open exchange rate exposure. If you export, you get euros and you ultimately need to cover your costs in Czech korunas.

“At least partly you can get rid of that risk when you take euro loan and you pay the interest and ultimately the principal payment in euros and not in Czech crowns.”

What businesses benefit most from conducting their dealings in euros?

“I think generally exporters prefer to stay in euros as a principal payment far as they can because they sell most of their goods abroad and they get euros for that. So they also prefer to pay their suppliers in euros.

“On the other hand, businesses that are more focused on the domestic market, those are mainly service-oriented companies but it could also be industrial companies, do not need to operate in euros. They rather tend to stick to the domestic currency as they do not sell the goods abroad.”

Would you say Czech businessmen are frustrated by the fact that politicians are cool on the euro?

Photo: Ondřej Tomšů
“In general I guess the Czech business sector would prefer faster adoption of the Euro. Maybe for now it is not such a big issue as before the big financial crisis as the Czech koruna is not strengthening significantly and its gains are rather mild.

“So it is not a serious problem for many businesses as the volatility is lower, but still the business sector I think would prefer faster adoption of the Euro or at least a clear strategy ahead of us.”

Can you foresee a time when there will be the Euro in the Czech Republic?

“Unfortunately, from my perspective, it is not on the table now and there is not a political decision on a timetable that would lead towards the euro adoption. So my view is that in the next four five years we cannot expect the adoption of the Euro.

“Later on it will very much depend on the outcome of the elections in the Czech Republic, because it is ultimately a political question to decide about the strategy of the euro adoption.”