Volatility of crown problem for Czech firms, says Škoda executive as fall of government raises questions over euro adoption date
One consequence of the fall of the government last week is increased uncertainty over when the Czech Republic will adopt the common European currency. A target date for joining the euro had been promised for November, but the cabinet that made that pledge will probably be long gone by then. What does this evident setback on the road to euro adoption mean for the Czech Republic? That’s a question I put to Radek Špicar, director of external affairs for the country’s biggest exporter, Škoda Auto.
“We still hope that either this government or a newly formed government will still take this issue very seriously and will announce a date for euro adoption at the end of this year.
“For business it is extremely important that the government does so, because without a date it is very difficult to plan anything. We are in a state of great uncertainty, and for business this is very unfortunate.”
In what ways is it unfortunate for Czech business?
“It is, because the Czech crown is very volatile. That’s the biggest problem. When you look at the currency, the exchange rate vis-à-vis the euro, you see that the Czech crown is basically jumping up and down every single week.
“So it’s hard to predict the development of the currency. And of course when you are in business that makes your life very difficult. Actually in both ways. When the Czech crown is getting stronger, then of course you lose profit. And when it gets weaker, yes it helps companies, but the problem is that a lot of them, in order to protect themselves against the strong currency used hedging – and now, despite the fact the Czech currency is weak – are losing a lot of money.”
How is the fact that the Czech Republic isn’t in the eurozone affecting your company Škoda?
“First of all we are losing profit. If you take last year, we as one company lost 6 billion crowns just because of the [fluctuations of the] Czech crown.”
When the financial crisis hit towards the end of last year many people said that it was good for the Czech Republic that it wasn’t in the eurozone.
“I don’t think so. We don’t have the euro and that’s why there is a lot of speculation on the Czech currency on the financial markets. It makes the Czech crown very volatile. So although I agree that in some way it helped us, I think that in general it was rather a disadvantage.”
The Czech president, Václav Klaus, is no fan of the euro, the biggest party in the outgoing government the Civic Democrats aren’t particularly enthusiastic about it…How do you think ordinary Czechs feel about the euro? Would they like to country to join?
“I think that the majority of them would. When you look at the opinion polls, at the beginning, a few years ago, the population was strongly against it. But I think that this has now changed. When you look at recent polls, the majority of Czech people realise that it would be an advantage for the country to have the euro.
Finally, assuming some day Czech Republic joins the euro, when do you think it’s actually going to happen?
“Well, we were hoping that it would be 2012, but that’s now impossible technically. It’s too late because as you know you have to join a certain system two years before you adopt the currency.
“So now the earliest possible time is 2013. We still hope that when the government decides about the date for euro adoption, it will be 2013.”
By the way, the governor of the Czech National Bank, Zdeněk Tůma, said at a conference on Wednesday that the most likely time for the Czech Republic to adopt the euro was between 2013 and 2015.
