Klaus given significant chance to influence monetary policy, euro adoption

There were mild ripples of excitement in the banking world this week when the governor of the central bank announced he would be quitting his post eight months earlier than expected. Czech National Bank governor Zdeněk Tůma said he would step down in June to minimise uncertainty caused by additional changes to the board in February next year. Choosing his successor is solely up to President Václav Klaus, who now has the chance to reshape Czech monetary policy.

The 49-year-old central bank governor announced this week he was stepping down from the post at the end of June, almost eight months before his second and final term in office was due to end in February 2011. Zdeněk Tůma told reporters the surprise move was to avoid uncertainty, saying three fellow board members are also due to step down in February and it’s better a new governor is already in place when those changes are made.

Zdeněk Tůma, photo: CTK

Mr Tůma said he’d given no recommendation to President Klaus as to who should succeed him, so the ball is now very much in the president’s court. Mr Klaus is highly critical of the euro project, and some observers believe he’ll seize the opportunity to fill the bank’s board with those who hold similar views. Analysts say this will give the president considerable influence over monetary policy. Pavel Mertlík, former finance minister and chief economist at the Czech division of Raiffeisenbank.

“There are two issues. One of them is definitely the process of choosing the next governor and members of the central bank board. The second point is that President Klaus is definitely one of the strong opinion leaders in the country, and he’s able to set the agenda. So the population’s support for such an issue like euro adoption is to a high degree influenced by him – on the other hand he’s not the only player."

"As regards the central bank, the basic point is that the changeover from the national currency to euro is a complicated and delicate task where there should be good cooperation between the government and the central bank. It’s certainly the government which must make the basic decisions and set the political agenda, but the practical implementation to a high degree is a question of monetary policy and very close coordination between the government and the central bank. So if there is a non-supportive central bank, there could be a problem.”

Václav Klaus, photo: CTK

The Czech Republic has no target for euro adoption, although it must adopt the currency under the terms of its membership of the European Union. The most recent date being bandied about is 2015, although it’s not backed up with any firm political commitment and won’t be until after May’s parliamentary elections. Nervousness in Europe over Greece’s fiscal woes also makes Czech euro adoption even more elusive.