During an interview for the quarterly magazine Harvard International Review, PM Babiš replied to a question regarding the Czech Republic adopting the euro.
“The Czech Republic is ready to enter the eurozone. But in this situation, when we expect some reforms to EU governance, we choose to wait. The euro is more of a political than an economic project,” Babis said.
“Besides that, we are now seeing serious structural challenges that are potentially very dangerous: tensions between the prosperous northern members of the EU and the stagnating south were clearly visible during the post-pandemic recovery package negotiations. And while the 19 states of the eurozone have a common currency, they still have different economic approaches and follow different budget strategies,” he added.
“No one has the power to force heavily indebted countries to act more reasonably. That is the main problem that must be urgently solved. Still, the fact that we criticize some aspects of the EU integration process does not mean that we are against the idea of European integration in general. Constructive criticism in the post-Brexit EU is necessary” Babis concludes.
According to the Eurobarometer, support for the euro in the Czech Republic stands at 33% (the lowest among non-euro EU member states), compared to 69% in Romania, 59% in Hungary and 48% in Poland.
In 2012, Czech Prime Minister Petr Necas rejected the “European fiscal compact” meant to enforce budget and fiscal discipline. Prague was, with London, the only capital not to join the compact.
Since joining the Union in 2004, the Czech Republic has been legally obligated to adopt the currency. However, governments have continually kicked the can down the road, and have retained the country’s current official currency, the koruna (CZK).
According to the annual report “Evaluation of Fulfillment of the Maastricht Convergence Criteria and Degree of Economic Convergence of the Czech Republic with the Euro Area” by the Ministry Finance and CNB, the Czech Republic currently meets the public finance, interest rate convergence and price stability criteria. Only the criterion of participation in the exchange rate mechanism has not been met (as the country does not participate in the relevant mechanism).
Even though the Czech economy has shown strong performance in recent years, local price and wage levels are still substantially below the older EU member states, “The Czech Republic’s own readiness for euro adoption has further improved, although some shortcomings remain, notably the unfinished process of real economic convergence.” The report also mentions future risks to the public finances, related to the long-term costs of an aging population.
There are nine EU countries that do not use the euro as their currency; the countries are Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, Sweden, and the United Kingdom.
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