Czech Republic and the euro

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Eurozone participation
  19 European Union member states in the eurozone
  7 European Union member states not in ERM II, but obliged to join the eurozone once convergence criteria are met (Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania and Sweden)
  1 European Union member state in ERM II, with an opt-out (Denmark)
  1 European Union member state not in ERM II, with an opt-out (United Kingdom)
  4 non-European Union member states using the euro with a monetary agreement (Andorra, Monaco, San Marino and Vatican City)
  2 non-European Union member states using the euro unilaterally (Kosovo[lower-alpha 1] and Montenegro)

The Czech Republic uses the Czech koruna as its currency and does not participate in European Exchange Rate Mechanism II. It is bound by its 2003 Treaty of Accession to the European Union to join the eurozone once it has satisfied the euro convergence criteria.

Although the Czech Republic is economically well positioned to adopt the euro, following the European debt crisis there has been considerable opposition among the public against the adoption of the euro currency.[1] According to a Eurobarometer poll in April 2015, 29% of Czechs were in favour of introducing the euro while 70% were opposed.[2] As of 2015, there is no target date for joining the ERM II[3] or adopting the euro.[4]

History

EUR-CZK exchange rate since 1999

The European Union membership referendum in 2003 approved the country's accession with 77.3% in favour, and in 2004 the Czech Republic joined the EU.[5]

Since joining the EU in May 2004, the Czech Republic has adopted fiscal and monetary policies that aim to align its macroeconomic conditions with the rest of the European Union. Initially, the Czech Republic planned to adopt the euro as its official currency in 2010, however evaluations in 2006 found this date to be unlikely and the target date was postponed indefinitely.[6] In February 2007, the Finance Minister said 2012 was a "realistic" date,[7] but by November 2007 this was said to be too soon.[8] In August 2008, an assessment said that adoption was not expected before 2015 due to political reluctance on the subject.[9] However, in October 2009, the then Finance Minister, Eduard Janota, stated that 2015 was no longer realistic.[10] In June 2008, the Central bank governor Zdeněk Tůma speculated about 2019.[11]

In late 2010 a discussion arose within the Czech government, partially initiated by then President Václav Klaus, a well known eurosceptic, over negotiating an opt-out from joining the eurozone. Czech Prime Minister Petr Nečas later stated that no opt-out was required because the Czech Republic could not be forced to join the ERM II and thus could decide if or when to fulfil one of the necessary criteria to join the eurozone, an approach similar to the one taken by Sweden. Nečas also stated that his cabinet would not decide upon joining the euro during its term.[12][13]

Recent development

The European sovereign-debt crisis further decreased the Czech Republic's interest in joining the eurozone.[14] Nečas said that since the conditions governing the eurozone had significantly changed since their accession treaty was ratified, he believed that Czechs should be able to decide by a referendum whether to join the eurozone under the new terms.[15] One of the government's junior coalition parties, TOP09, was opposed to a euro referendum.[16][17]

In April 2013, the Czech Ministry of Finance stated in its Convergence Programme delivered to the European Commission that the country had not yet set a target date for euro adoption and would not apply for ERM II membership in 2013. Their goal was to limit their time as an ERM II member, prior to acceding to the eurozone, to as brief as possible.[18] On 29 May 2013 Miroslav Singer, the Governor of the Czech National Bank (the Czech Republic's central bank) stated that in his professional opinion the Czech Republic will not adopt the euro before 2019.[19] In December 2013, the Czech government approved a recommendation from the Czech National Bank and Ministry of Finance against setting a formal target date for euro adoption or joining ERM II in 2014.[20]

Miloš Zeman, who was elected President of the Czech Republic in early 2013, supports euro adoption by the Czech Republic, though he also advocates for a referendum on the decision.[21][22] Shortly after taking office in March 2013, Zeman suggested that the Czech Republic would not be ready for the switch for at least five years.[23] Prime Minister Bohuslav Sobotka, from the Social Democrats, stated on 25 April 2013, prior to his party's election victory that October, that he was "convinced that the government that will be formed after next year's election should set the euro entry date" and that "1 January 2020 could be a date to look at".[24][25] Shortly after being sworn into the new Cabinet in January 2014, Czech Foreign Minister Lubomír Zaorálek stated that the country should join the eurozone as soon as possible.[26] The opposition TOP 09 had also run on a platform in the 2013 parliamentary election, that called for the Czech Republic to adopt the euro between 2018-2020.[27] In line with this, the governor of the Czech National Bank, having an advisory role towards the government about the timing of euro adoption, described 2019 as the earliest possible euro entry date.[28]

In April 2014, the Czech Ministry of Finance clarified in its Convergence Programme delivered to the European Commission, that the country had not yet set a target date for euro adoption and would not apply for ERM-II membership in 2014. Their goal was to limit their time as an ERM-II member, prior to acceding to the eurozone, to as brief as possible. Moreover, it was the opinion of the previous government that: "the fiscal problems of the eurozone, together with continued difficulty to predict the development of the monetary union, do not create a favorable environment for the future adoption of the euro."[29]

Zeman stated in June 2014 that he hoped his country would adopt the euro as soon as 2017, arguing that adoption would be beneficial for the Czech economy overall.[30] The opposition ODS party responded by running a campaign for Czechs to sign an anti-euro petition, handed over to the Czech Senate in November 2014, but viewed by political commentators as not having any impact on changing the government's policy to adopt the euro in the medium-term without holding a referendum on it.[31]

In December 2014, the Czech government approved a joint recommendation from the Czech National Bank and Ministry of Finance, against setting a formal target date for euro adoption or joining ERM-II during the course of 2015.[3] In March 2015, the ruling Czech Social Democratic Party adopted a policy of striving to gather political support to adopt the euro by 2020.[32] In April 2015, the coalition government announced it had agreed to not set a euro adoption target and not to enter ERM-2 before after the next legislative election scheduled for 2017, making it unlikely that the Czech Republic will adopt the euro before 2020. In addition, the coalition government agreed that if it wins re-election it would set a deadline of 2020 to agree on a specific euro adoption roadmap.[33]

Status

The 1992 Maastricht Treaty originally required that all members of the European Union join the euro once certain economic criteria are met. The Czech Republic meets four of five conditions for joining the euro; not being a member of the European exchange rate mechanism is the only condition not met.

Convergence criteria
Assessment month Country HICP inflation rate[34][nb 1] Excessive deficit procedure[35] Exchange rate Long-term interest rate[36][nb 2] Compatibility of legislation
Budget deficit to GDP[37] Debt-to-GDP ratio ERM II member[38] Change in rate[39][40][nb 3]
2012 ECB Report[nb 4] Reference values Max. 3.1%[nb 5]
(as of 31 Mar 2012)		 None open (as of 31 March 2012) Min. 2 years
(as of 31 Mar 2012)		 Max. ±15%[nb 6]
(for 2011)		 Max. 5.80%[nb 7]
(as of 31 Mar 2012)		 Yes[42]
(as of 31 Mar 2012)
Max. 3.0%
(Fiscal year 2011)[43]		 Max. 60%
(Fiscal year 2011)[43]
 Czech Republic 2.7% Open No 2.7% 3.54% No
3.1% 41.2%
2013 ECB Report[nb 8] Reference values Max. 2.7%[nb 9]
(as of 30 Apr 2013)		 None open (as of 30 Apr 2013) Min. 2 years
(as of 30 Apr 2013)		 Max. ±15%[nb 6]
(for 2012)		 Max. 5.5%[nb 9]
(as of 30 Apr 2013)		 Yes[45]
(as of 30 Apr 2013)
Max. 3.0%
(Fiscal year 2012)[46]		 Max. 60%
(Fiscal year 2012)[46]
 Czech Republic 2.8% Open No -2.3% 2.30% Unknown
4.4% 45.8%
2014 ECB Report[nb 10] Reference values Max. 1.7%[nb 11]
(as of 30 Apr 2014)		 None open (as of 30 Apr 2014) Min. 2 years
(as of 30 Apr 2014)		 Max. ±15%[nb 6]
(for 2013)		 Max. 6.2%[nb 11]
(as of 30 Apr 2014)		 Yes[48]
(as of 30 Apr 2014)
Max. 3.0%
(Fiscal year 2013)[49]		 Max. 60%
(Fiscal year 2013)[49]
 Czech Republic 0.9% Open (Closed in June 2014) No -3.3% 2.21% No
1.5% 46.0%


  Criterion fulfilled
  Criterion potentially fulfilled: If the budget deficit exceeds the 3% limit, but is "close" to this value (the European Commission has deemed 3.5% to be close by in the past),[50] then the criteria can still potentially be fulfilled if either the deficits in the previous two years are significantly declining towards the 3% limit, or if the excessive deficit is the result of exceptional circumstances which are temporary in nature (i.e. one-off expenditures triggered by a significant economic downturn, or by the implementation of economic reforms that are expected to deliver a significant positive impact on the government's future fiscal budgets). However, even if such "special circumstances" are found to exist, additional criteria must also be met to comply with the fiscal budget criterion.[51][52] Additionally, if the debt-to-GDP ratio exceeds 60% but is "sufficiently diminishing and approaching the reference value at a satisfactory pace" it can be deemed to be in compliance.[53]
  Criterion not fulfilled


Notes
  1. ↑ The 12-month average for the annual HICP inflation rate must be no more than 1.5% larger than the unweighted arithmetic average of the similar HICP inflation rates in the 3 EU member states with the lowest HICP inflation. If any of these 3 states have a HICP rate significantly below the similarly averaged HICP rate for the eurozone (which according to ECB practice means more than 2% below), and if this low HICP rate has been primarily caused by exceptional circumstances (i.e. severe wage cuts or a strong recession), then such a state is not included in the calculation of the reference value and is replaced by the EU state with the fourth lowest HICP rate.
  2. ↑ The annual average for the yield of 10-year government bonds must be no more than 2.0% larger than the unweighted arithmetic average of the bond yields in the 3 EU member states with the lowest HICP inflation. If any of these states have bond yields which are significantly larger than the similarly averaged yield for the eurozone (which according to previous ECB reports means more than 2% above) and at the same time does not have complete funding access to financial markets (which is the case for as long as a government receives bailout funds), then such a state is not be included in the calculation of the reference value.
  3. ↑ The change in the annual average exchange rate against the euro.
  4. ↑ Reference values from the ECB convergence report of May 2012.[41]
  5. ↑ Sweden, Ireland and Slovenia were the reference states.[41]
  6. ↑ 6.0 6.1 6.2 The maximum allowed change in rate is ± 2.25% for Denmark.
  7. ↑ Sweden and Slovenia were the reference states, with Ireland excluded as an outlier.[41]
  8. ↑ Reference values from the ECB convergence report of June 2013.[44]
  9. ↑ 9.0 9.1 Sweden, Latvia and Ireland were the reference states.[44]
  10. ↑ Reference values from the ECB convergence report of June 2014.[47]
  11. ↑ 11.0 11.1 Latvia, Portugal and Ireland were the reference states.[47]

Opinion polls

The following are polls on the question whether the Czech Republic should abolish the koruna and adopt the euro currency.

Date (survey taken) Date (when published) YES NO Unsure Number of participants Held by
September 2004 October 2004 52% 48% 0% - Eurobarometer[54]
September 2005 November 2005 49% 51% 0% - Eurobarometer[55]
December 2005 January 2011 44% 56% 0% - STEM[56]
April 2006 June 2006 56% 44% 0% - Eurobarometer[57]
June 2006 January 2011 46% 54% 0% - STEM[56]
September 2006 November 2006 56% 44% 0% - Eurobarometer[58]
November 2006 January 2011 47% 53% 0% - STEM[56]
April 2007 November 2007 57% 43% 0% - Eurobarometer[59]
September 2007 November 2007 56% 44% 0% - Eurobarometer[59]
May 2008 July 2008 54% 46% 0% - Eurobarometer[60]
May 2009 2009 61% 39% 0% - Eurobarometer[61]
September 2009 2009 48% 52% 0% - Eurobarometer[62]
September 2010 January 2011 30% 70% 0% - STEM[56]
September 2010 December 2010 41% 59% 0% - Eurobarometer[63]
January 2011 2011 22% 78% 0% - STEM[56]
May 2011 August 2011 33% 67% 0% - Eurobarometer[64]
November 2011 July 2012 13% 82% 5% - Eurobarometer[65]
April 2012 July 2012 13% 81% 6% - Eurobarometer[66]
April 2013 June 2013 14% 80% 6% - Eurobarometer[67]
April 2014 June 2014 16% 77% 7% - Eurobarometer[68]
April 2015 May 2015 29% 70% 1% - Eurobarometer[2]

See also

References

  1. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  2. ↑ 2.0 2.1 http://ec.europa.eu/economy_finance/pdf/2015/fl_418_en.pdf
  3. ↑ 3.0 3.1 Lua error in package.lua at line 80: module 'strict' not found.
  4. ↑ The Czech Republic and the euro. European Commission.
  5. ↑ Direct Democracy. sudd.ch
  6. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  7. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  8. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  9. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  10. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  11. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  12. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  13. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  14. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  15. ↑ Lua error in package.lua at line 80: module 'strict' not found. Cite error: Invalid <ref> tag; name "euo111028" defined multiple times with different content Cite error: Invalid <ref> tag; name "euo111028" defined multiple times with different content
  16. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  17. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  18. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  19. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  20. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  21. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  22. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  23. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  24. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  25. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  26. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  27. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  28. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  29. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  30. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  31. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  32. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  33. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  34. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  35. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  36. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  37. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  38. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  39. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  40. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  41. ↑ 41.0 41.1 41.2 Lua error in package.lua at line 80: module 'strict' not found.
  42. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  43. ↑ 43.0 43.1 Lua error in package.lua at line 80: module 'strict' not found.
  44. ↑ 44.0 44.1 Lua error in package.lua at line 80: module 'strict' not found.
  45. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  46. ↑ 46.0 46.1 Lua error in package.lua at line 80: module 'strict' not found.
  47. ↑ 47.0 47.1 Lua error in package.lua at line 80: module 'strict' not found.
  48. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  49. ↑ 49.0 49.1 Lua error in package.lua at line 80: module 'strict' not found.
  50. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  51. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  52. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  53. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  54. ↑ September 2004 Eurobarometer report
  55. ↑ September 2005 Eurobarometer report
  56. ↑ 56.0 56.1 56.2 56.3 56.4 Lua error in package.lua at line 80: module 'strict' not found.
  57. ↑ March April 2006 Eurobarometer report
  58. ↑ September 2006 Eurobarometer report
  59. ↑ 59.0 59.1 September 2007 Eurobarometer report
  60. ↑ May 2008 Eurobarometer report
  61. ↑ May 2009 Eurobarometer report
  62. ↑ September 2009 Eurobarometer report
  63. ↑ 2010 Eurobarometer report
  64. ↑ 2011 May Eurobarometer report
  65. ↑ 2011 November Eurobarometer report
  66. ↑ 2012 Eurobarometer report
  67. ↑ 2013 Eurobarometer report
  68. ↑ 2014 Eurobarometer report


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