The Czech Republic could still adopt the euro in 2013, said former Czech National Bank vice-governor and current head of consultants at Deloitte, Luděk Niedermayer. However, the single European currency will not be introduced unless some entity fully supports the objective, he added. The driving force behind Slovakia’s eurozone entry was the National Bank of Slovakia, while the ČNB cannot be relied on, Niedermayer said. “It is rather a political decision, but I think that a certain part of the ČNB is not neutral at the moment,” he said. Apart from governor Zdeněk Tůma, there are now “Klaus’s people” on the governing board who are rather sceptical about the single currency, he added.
The crown, and in particular its strong volatility, is harming businesses badly, said Niedermayer. “At present, politicians are coming into play who are advocates of the crown and who have said since the beginning of the crisis: Great, the crown is losing, it will help businesses. But businesses incurred huge financial losses from currency hedging for the whole half of the year. At the same time, their sales decreased, they had sold euros, and the crown weakened. With many companies, losses stemming from currency hedging are much bigger than losses caused by a decline in exports,” said Niedermayer.
Not adopting the euro can harm the country in the long-run, he said. “It is not coincidence that for instance Volkswagen opted for Slovakia for the production of its small cars, and not for the Czech Republic, because the swings that influence the company’s performance are huge. Many businesses operate with enormously low markups in the order of single per cent. When accompanied by exchange rate swings in the order of dozens of per cent, then it is a huge problem,” he added. According to Niedermayer, the opinions that the existence of a national currency can help the central bank fight the crisis do not provide an argument against the euro. The crown is tied to the euro significantly, so the monetary policy has little autonomy, he said.
But euro introduction within four years is probably not too realistic in the Czech Republic. The country has not even set an official date for eurozone entry. ČNB governing board member Vladimír Tomšík told the Bloomberg news agency a month ago that the current crisis “completely killed” the debate on setting a date for euro adoption in the Czech Republic. The reason is that the country will fail to comply with the set criteria at least until 2012. Tomšík’s colleague on the board, Mojmír Hampl, questioned that the Czech Republic would be able to set a euro adoption date this year.
Until recently, the Social Democratic Party was a strong advocate of euro introduction, which was one of its priorities. However, it erased it from its new election programme, and party chairman Jiří Paroubek said that euro adoption in 2013 was unrealistic.
