Czech officials talk up euro adoption but target date still not on agenda

Adopting the euro would cost the Czech Republic around half a percent of gross domestic product, the state secretary for European Affairs, Tomáš Prouza, said on Friday.

Tomáš Prouza, photo: TomasP01, CC BY-SA 3.0

If the Czech Republic switches to the common European currency it would pay CZK 34 billion into the European Stabilisation Mechanism, Mr. Prouza told a conference on euro adoption in Prague.

The senior official also said that the country fulfilled the criteria for euro adoption much better today than it did 11 years ago.

His comments were echoed by MEP and former vice-governor of the Czech National Bank Luděk Niedermayer, who said few countries were as well prepared for joining the Eurozone.

Friday’s news conference followed a visit to Prague the previous day by Valdis Dombrovskis, European Commission vice-president for the euro.

Valdis Dombrovskis, photo: ČTK

The Latvian politician said that from the economic perspective the Czech Republic was now ready to adopt the euro; doing so was now primarily a matter of political decision and will, he said.

Mr. Prouza said intensifying the public debate on replacing the crown was a priority for the government this year. Research suggests Czech lack objective information on the benefits of euro adoption, he said.

The Czech Republic is required to join the Eurozone under the terms of its EU membership. However, there is no set date by which it must do so.

The main criteria are having a government deficit of no more than 3% of GDP; having government debt of no more than 60% of GDP; price stability; and low inflation.

In Mr. Prouza’s view, meeting those criteria is just a minimum. What’s important is convergence with the Eurozone, he said at the conference.

In addition, the state budget must have sufficient capacity at the moment the Czech Republic loses its own monetary policy; it is necessary to have ample reserves to be able to react to a crisis, he said.

Bohuslav Sobotka and Valdis Dombrovskis, photo: ČTK

Speaking at the same conference, Prime Minister Bohuslav Sobotka said the country should not set a date for euro adoption until its public finances improve and its standard of living gets closer to that of developed EU states.

Mr. Sobotka’s government has repeatedly said that it will not fix a target date for joining the Eurozone during its term in office.

The prime minister said the Czech Republic continued to have a public finance deficit, some regions still had high jobless rates and citizens’ earnings remained below those of countries with the euro, in particular Germany and Austria.

The only criterion the Czech Republic does not fulfil for euro adoption is participation in the Exchange Rate Mechanism II, which would establish central parity between the crown and the euro. It can be evaluated only after the crown has been in ERM II for at least two years.