The Government has approved the joint recommendation of the Ministry of Finance of the Czech Republic and the Czech National Bank not to set a target date for adopting the euro in the Czech Republic yet.
The decision is based on information contained in this year’s “Assessment of the Fulfilment of the Maastricht Convergence Criteria and the Degree of Economic Alignment of the Czech Republic with the Euro Area”. This document maps out the Czech Republic’s economic preparedness for adopting the euro and the Government has been assessing it every year since the Czech Republic joined the European Union.
The Czech Republic will most probably be compliant this year with all the Maastricht convergence criteria except for the exchange rate criterion, as it does not participate in the relevant mechanism. Continued compliance with these criteria is likely in the medium term.
The preparedness of the Czech Republic itself to adopt the euro has improved compared to previous years, although some shortcomings persist. The unfinished process of real economic convergence of the Czech Republic can still be considered the main obstacle to joining the monetary union. Although convergence has resumed in recent years, the gaps in most key indicators, the price and wage levels in particular, remain significant. Substantial differences vis-à-vis the euro area also persist in the structure of the Czech economy. Given population ageing, the issue of public finance sustainability is not fully resolved. Misalignment of the business cycles of the Czech Republic and the euro area is also a barrier to euro adoption.
The institutions and rules of the euro area have changed significantly over recent years and discussions on deepening integration are still ongoing. The Czech Republic’s future potential financial and non-financial commitments relating to euro area entry thus cannot be reliably estimated at the moment.
Given the aforementioned facts, the Ministry of Finance and the Czech National Bank have concluded that the Czech Republic has not yet made sufficient progress in laying the groundwork for euro adoption to allow it to set a target date for entry into the euro area.
- Assessment of the Fulfilment of the Maastricht Convergence Criteria and the Degree of Economic Alignment of the Czech Republic with the Euro Area - 2018