The government again refused to set a date for the adoption of the euro. On the recommendation of the Ministry of Finance and the CNB – ČT24 – Czech Television

The government adopted a joint recommendation @MinFinCZ a @CNB_cz not yet set a target date for the adoption of the euro in the Czech Republic. The joint material also deals with the assessment of the fulfillment of the Maastricht convergence criteria. This year, the Czech Republic will probably meet the criterion of interest rates. https://t.co/5Wp20MxyjW

– Ministry of Finance (@MinFinCZ) December 7, 2020

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Every year, both institutions submit to the government material on the topic of meeting the Maastricht convergence criteria and the degree of economic alignment of the Czech Republic with the euro area. This year, too, they advised her not to set a target date for joining the eurozone. The material has always included such a recommendation in recent years. The government of Andrej Babiš (YES) stated in its program statement that it would not seek to join the eurozone.

Upon accession to the European Union (since May 2004), the Czechia has committed itself to taking steps to be ready for accession to the euro area as soon as possible. The setting of the date of entry is a matter for the Member State and depends on the degree of its readiness. Any non-fulfillment of the convergence criteria has no direct consequences for the Czechia. The exception is the criterion of the sustainability of public finances.

Concerns about financial and non-financial liabilities

The Ministry of Finance and the CNB also stated in their analysis that the shape of institutions and the rules of the euro area have changed in recent years, and negotiations on deepening European integration have continued.

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What are the “against”

Among other things, the analysis shows that weaknesses remain in the Czech Republic’s own readiness to adopt the euro. The government considers the unfinished process of the Czech Republic’s economic convergence with the euro area countries to be an obstacle to joining the monetary union, where the gap with most key indicators, especially price and wage levels, remains significant, according to the report.

According to the material, the structure of the Czech economy vis-à-vis the euro area also continues to differ significantly. This would in turn complicate the implementation of the single monetary policy. “Given the aging population, the problem of the long-term sustainability of public finances is also unresolved, the stabilizing effect of which should partially compensate for the loss of autonomous monetary policy after the adoption of the euro,” the joint press release said.

What are “for”

On the other hand, the adoption of the euro has long been supported by the high degree of openness of the Czech economy and its strong trade and ownership links with the euro area.

The institution also evaluates positively the relatively stable exchange rate of the koruna against the euro, even during this year’s deep economic downturn, the renewed alignment of the financial markets of the Czech Republic and the euro area or the resilient banking sector in the Czech Republic.

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