Why the Czech Republic wants to keep the koruna
The seats in the large lecture hall in Hachenburg were visibly spaced out. All 60 registered visitors wore face masks as they made their way to their designated seats. A video camera was installed in front of the lectern, streaming the event to a neighbouring lecture hall and to other students watching from home. The Bundesbank’s University of Applied Sciences had planned its first public event in months meticulously in order to allow as many people as possible to attend.
After all, the University is celebrating its 40th anniversary this year. However, there has been little sign of celebration in Hachenburg so far.
“The coronavirus meant that we had to cancel all the festivities we had planned from March to July. I am therefore especially pleased to welcome you here today,” Hachenburg rector Erich Keller said as he introduced Marek Mora, Deputy Governor of the Czech central bank. It was Mr Mora’s first business trip since February. He gave his speech in German, having lived in Saarbrücken and Leipzig for several years while studying for his doctorate. The title of his speech was: “When will the euro be introduced in the Czech Republic?”
Euro accession possible, …
Mr Mora explained that the economic situation in the Czech Republic would allow euro membership. Unemployment stood at 2.7% and the debt level was 30% of gross domestic product, which is well below the Maastricht limit of 60%, he said. Long-term interest rates were also 1.5%, which is clearly beneath the 2.9% threshold. Only the inflation rate of currently 3.2% breached the threshold of 1.8%.
“However, I believe that the Maastricht approach is heading in the wrong direction here. The reference value should not be based on the lowest value, but on whether inflation is at the desired level. After all, it is below its self-proclaimed target in the euro area,” Mr Mora said. “If the Czech Republic wanted to join the euro, we would be able to do it.”
… but not “on the agenda”
In Mr Mora’s opinion, however, the advantages of an independent Czech currency outweigh the disadvantages.
“We are still able to adjust the exchange rate. This is of benefit for a small, open economy like ours.” The introduction of the euro risked higher inflation, he explained. Moreover, approval rates among the Czech population have been low for years.
“The euro area has lost its appeal,” Mr Mora said, citing, in particular, the institutional problems of a currency area with 19 sovereign Member States. Joining the euro was therefore not on the Czech Republic’s agenda.