Economist: Czechs need to extend mining for independence from Russian gas

Danuše Nerudová

Things were already looking grim for the economy before Russia’s war on Ukraine, but now many Czechs are bracing themselves for massive price increases. Ahead of a government meeting Wednesday on helping citizens cope with rocketing energy costs, I discussed various issues with economist Danuše Nerudová.

“The main impact of the Ukrainian conflict is especially the rising prices of natural gas and crude oil for the Czech Republic.

“Currently the prices of gas are hitting their maximum in the last 13 years.

“Therefore I expect that the government will respond with some action – for an example, a decrease in excise duties on oil.”

Also the Czech crown has been losing to the euro. Do you think this situation will impact the debate about adopting the single European currency in this country?

“I really do hope that the falling Czech crown will accelerate the discussion about the euro in the Czech Republic.

“Because that’s the solution which would be easiest.

“On Thursday the Czech National Bank started to intervene on the markets to keep the exchange rate of the Czech crown.

“But the long-term solution is really the euro for the Czech Republic.”

Do you think that’s actually likely to happen? Politically, is there the will for this?

“The problem with the euro introduction in the Czech Republic is not an economic one but a political one.

“And I think that the conflict in Ukraine will break the ice in the ideas of politicians, that the euro for the Czech Republic is really a must.

“Because the Czech crown is perceived as an eastern currency and investors do not believe at the moment in eastern currencies.”

What about the issue of the Czech Republic’s energy policy? The Czechs were planning to get out of coal mining. Will that be affected by the situation in Ukraine and what’s happening now?

“I really do hope that work on the Green Deal will accelerate due to the Ukrainian conflict.

“However, it is necessary is to say that the Czech Republic is not able to change its energy mix without nuclear power stations and probably without coal.

“I think that the period of coal mining will have to be prolonged in order for the Czech Republic to be able to become independent of Russian gas.”

They were saying before this conflict that this year there was going to be inflation of 8 or 9 percent maybe in the Czech Republic. How does it look now? And how does it look for ordinary Czech people this year. People plan holidays and so on – will they have to rethink their plans and maybe tighten their belts this year?

Illustrative photo: Filip Jandourek,  Czech Radio

“At the moment it seems that the inflation is going to be more than 10 percent. I’m talking about the average inflation for 2022.

“And of course this is affecting people, in the prices of energy, in the prices of gas and also in the prices of mortgages.

“Because the interest rates on mortgages are rising.

“Therefore we can expect a huge impact on Czech people, and also on basic foodstuffs and thinks like this, due to the Ukrainian conflict.

“There is probably going to be a lack of wheat in Europe and in especially in African countries.”

What about the Czech workforce? Obviously a lot of Ukrainian men will be leaving to go home and serve their country. You also have a big influx of Ukrainian refugees. What will be the impact do you expect on the Czech labour market, or labour force?

“On one hand it’s a problem, because as you said a lot of Ukrainian workers are leaving to fight in Ukraine.

“However, we have a number of refugees and I think that’s a great opportunity for the Czech labour market, that these forces can replace those who are leaving.

“And those workers can help the Czech economy to transform into an economy with higher value added.”