Articles / Rubric: Global

Czechs Prefer Their Koruna
July - August 2013 | Global

If the referendum to adopt the euro in the Czech Republic had been held this week, the results would have been likely to have pleased opponents to the single currency. According to a survey conducted by the Czech Center for Public Opinion, 48 percent of respondents said they opposed using the euro while 29 percent were only slightly less critical. That means that for every supporter of a single currency, there are at least four people against it. The Czech Center for Public Opinion (CCPO) also stated that only 14 percent of respondents expressed agreement to adopting the euro, while one in 12 said they had no opinion.

CCPO analysts also commented on the demographic spread among respondents: “Supporters of introducing a single European currency were more often people under 30, the majority of whom had at least a university degree. Respondents who support the Czech Republic joining the Eurozone included people with incomes higher than average, students, those who support the current government, and those inclined to call the economic situation in the Czech Republic good,” said a CCPO representative.

According to this annual study, support for the euro has plummeted since the beginning of the economic crisis.

However, despite the public opinion polls, Czech Prime Minister Petr Necas assured the President of the European Council, Herman Van Rompuy, that the Czech Republic aims to adopt the euro, but the country must first hold a national referendum.

The newly elected Czech President Milos Zeman, who is known for his Euro-federalist views, is asserting that it is within his power to promote the introduction of the euro within five years, i.e., within his presidential term. Prime Minister Necas is more skeptical about the idea of a united Europe and thinks that the Czech Republic won’t be ready to join the Eurozone until 2018.

Entry into the Eurozone means that the Czech Republic will be required to fully assume all obligations imposed on it by the European Stability Mechanism (ESM). In order to do that, the country will have to put money into a stabilization fund, which Czech economists assess will be to the tune of 280 billion Czech koruna (€11.2 billion). In early April, President Zeman signed an amendment to the Lisbon Treaty ratifying the creation of the ESM, which is supposed to rescue Europe from the crisis.  It was then that the country’s leading analysts pointed out that times have changed. A European Union flag flies over the Prague Castle, something the country’s former President, Vaclav Havel, would never have allowed. The Czech Republic is the last of the 27 countries in the European Union to have ratified the European Stability Mechanism. Yet the President didn’t fail to comment that he hoped the crisis will be a thing of the past by the time the Czech Republic joins the Eurozone.

The President and Prime Minister both think that signing the European Stability Mechanism agreement will attract new investors to the country, generate new jobs, and provide for the Czech Republic’s full integration into the European Union’s economy. Analysts confirm that the adoption of the euro is vital to the country, which has an economic cycle that has kept pace with the Germans in recent years.

While Czech authorities claim that the new political path promotes economic growth and European integration, leading experts from the European Commission predict hard times to come for the Czech Republic. According to the Commission, economic growth next year will be just 1.6% instead of the estimated 1.9%.

The development of public finances has a much more favorable forecast. The 2013 budget deficit will fall to 2.9% from last year’s 4.4% of GDP. Back in April, it was expected that the budget deficit would be 3.1% of GDP. The new forecast has also allowed the government to announce that citizens will not face increased taxes or the introduction of new banknotes, which pessimistic economists had earlier feared.

Czech Minister of Finance Miroslav Kalousek said in early May that the reduction in the budget deficit to 3% should encourage new economic initiatives. “Thanks to the fact that we achieved our main goal of significantly reducing the budget deficit, we can afford to implement economic measures that we’ve had to postpone until now,” Kalousek said. These measures include pro-European beginnings for the Czech economy.

Moreover, it is expected that next year’s favorable economic outlook will impact people’s lives. Increased purchasing power and demand for most commodities are expected, as are improvements in the unemployment situation. According to the European Commission, unemployment next year should fall 7.4% to 7%.

Text: Catalina Kochkina

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