Czech president and prime minister pushing for euro-adoption target date amidst opposition from finance minister and central bank

09-04-2015

President Miloš Zeman and Prime Minister Bohuslav Sobotka have stressed the need for the Czech Republic to push ahead with plans for the adoption of the euro. At their meeting on Wednesday they said it was time for the country to adopt a time-frame and proceed in meeting the set convergence criteria. However, Finance Minister Andrej Babiš and central bank governor Miroslav Singer oppose the initiative arguing that in view of the eurozone’s problems the question of euro adoption is premature.

Photo: Štěpánka BudkováPhoto: Štěpánka Budková All EU member states who are not in the Eurozone, with the exception of Denmark and the UK who have opt-outs, are committed to adopting the euro once they are able to meet the set convergence criteria. Although the Czech Republic joined the EU more than ten years ago, it is in no rush to do so. While the country’s eastern neighbor and former sister-state Slovakia adopted the euro in 2009, the Czech Republic has been reluctant to set a target date and that reluctance has only increased with the euro zone’s debt crisis and questions over Greece’s future in the alliance.

President Zeman is now trying to rev up the process of adopting a target date and meeting the set economic criteria. He believes that if there is a will on the part of the government and central bank, technically the process could be completed within three years. And he has requested a meeting on the euro at Lany Chateau in May to which he plans to invite government officials and representatives of the central bank. A strong advocate of euro adoption, the president has repeatedly criticized the central bank for dragging its feet on the issue and even accused the bank of intentionally trying to delay the process of adoption through its fiscal policy.

Recently, Mr. Zeman, who is solely responsible for appointing the central bank’s board, made it clear that he would chose a pro-euro central bank governor when Mr. Singer’s term in office expires next year.

Prime Minister Sobotka also underlined his commitment to the euro-adoption process although he was more cautious in his estimate of how soon this can realistically be achieved, putting forward 2020 as an acceptable target date.

However, finding broad support for this plan in the coalition government is not going to be easy. Adoption of the euro is not part of the coalition agreement and the leader of the second strongest party in government, Finance Minister Andrej Babiš has already made it clear that he considers a debate on a euro target date premature. “There is no sense in debating the matter when the future of the Eurozone is unclear – we do not know if Greece is staying or leaving or even if the Eurozone will be able to deal with its debt” Babiš told reporters. Pavel Bělobrádek, the leader of the Christian Democrats, the smallest party in the governing coalition, is also reluctant to support a target date at this stage telling the press “we should wait and see how the euro-zone develops and even if we are able to meet the set criteria”.

So, all said and done, unless the EU itself puts pressure on Prague to make a move, this “wait and see” policy on the euro is likely to win-out.

09-04-2015