Euro adoption comes off the sidelines but star billing still uncertain
After a long time on the back burner, the question of euro adoption seems to be making a comeback in the Czech Republic. Champions of the idea are now pointing out that the country fulfills nearly all the criteria for joining the euro-zone and the timing could hardly be better.
But what has remained a twinkle in the eye for some euro enthusiasts, economists and businessmen could be back on the agenda again. That at least was the idea of a conference on euro adoption hosted by the Czech government last week. State Secretary of European Affairs Tomáš Prouza promised that the debate would be taken out of the heady hothouse atmosphere of Prague and into the regions.
And the state secretary gave the distinct impression that the Czech Republic should start looking at euro adoption very hard soon or face the prospect in the near future of cooperation between the hard core of euro-zone countries deepening further and the Czech Republic being on the outside and not having much of a say on the speed and direction of the ever closer euro zone taking shape.
With the financial, budgetary, and banking rules surrounding the euro still a work in progress, that worry about an evolving and more distant and different euro zone represents a palpable concern.
But the conference, which promised to discuss both the benefits and risks of euro adoption, also gave plenty of room to those warning against joining the euro zone. These ranged from the current governor of the Czech National Bank, Miroslav Singer, to the head of the country’s main confederation of trades unions, Josef Středula. Some, like Středula, say the real Czech economy, that is that seen the perspective of the relatively low average wages of most Czechs is still way adrift of most of the prosperous core euro zone and that euro adoption for now is unthinkable.
But former finance minister, now the rector of Škoda Auto University, Pavel Mertlík says that as regards euro adoption the progress on wealth catch up is not so crucial. For him, the key fact is that the Czech Republic is significantly integrated in the same economic cycle as its biggest trading partner, Germany, and the other major euro users:
“There is convergence since 2014, which is a short time, before that we had seven years of real divergence, I should say. Now we are on the level of around 2008 as regards GDP per capita compared with the euro zone. But my key argument is that the euro zone is not uniform and definitely it is not realistic to expect that all counties of the euro zone will be at the same economic level. What is important is the cyclical economic behavior of the individual national economies and they should be harmonized and the Czech Republic is already deeply harmonized with the business cycle in the European Union."
