Jan 01, 2024

President Pavel Calls for “Strength and Unity” and “Concrete Steps Towards Euro Adoption”

In his New Year address to the nation, President Petr Pavel underlined the need for strength and unity, saying it had been a difficult year from which he hoped to see the nation emerge stronger.

Looking back on the past year, Mr. Pavel said he appreciated the government’s unity in undertaking unpopular measures to tackle the country’s debt, but criticized it for poor communication towards the public, which he said opened the door to populism.

“We expect lower inflation, real wage growth for the first time in several years, and modest economic growth. I hope it will mark a turn for the better and give us all reason for greater optimism in the years to come,” the president concluded.

President Pavel also devoted time to the 20th and 25th anniversaries of the country’s membership in the European Union and NATO, stressing their importance for the country’s security and economic development.

The President emphasizes the need to take tangible actions to fulfill the commitment to adopt the euro.

Despite the ongoing debates about the pros and cons of the euro for a country with an open and export-oriented economy, the common currency is deemed the logical future, notes the President.

Last November, Hospodarske noviny reported on ministries debating whether the government should initiate steps to adopt the euro. A report by the finance ministry and the Czech National Bank indicated that the Czech Republic is likely to meet some Maastricht criteria for adopting the currency this year.

However, the document recommended refraining from taking steps in this direction, drawing criticism from ministers in the STAN movement.

To join the eurozone, a country must fulfill the four Maastricht criteria. The price stability criterion stipulates that the country’s inflation rate must not exceed by more than 1.5 percentage points the average inflation rate of the three eurozone countries with the lowest price growth.

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The long-term interest rate criterion requires that the long-term interest rate be no more than two percentage points above the average of the three eurozone countries with the lowest inflation.

The public finance criterion sets a maximum budget deficit of three percent of gross domestic product (GDP) and a maximum debt ratio of 60 percent of GDP.

The last criterion is exchange rate stability, requiring two years of membership in the European Exchange Rate Mechanism (ERM II).

The government of the Together (ODS, KDU-ČSL, TOP 09) and Pirates with STAN, in its program statement, does not set a deadline for adopting the euro by the end of its term in 2025. However, the document commits the cabinet to meeting the Maastricht criteria as soon as possible.

 

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