According to the updated strategy for the Czech Republic accession to the euro zone, the country will adopt the euro in 2010, one year earlier than previously planned, financial ministry spokesman Radek Nemecek announced.
Nemecek added that, however, no official date has been set yet and that in the following months the finance ministry and the Czech National Bank (CNB) experts will update the strategy, while the cabinet is expected to discuss it in the autumn. We recall that recently finance minister Bohuslav Sobotka said that savings worth CZK 30bn (EUR 1bn) should be made in 2006 to ensure the country's readiness for euro adoption between 2009
and 2010; however, the latest economic developments showed that lower cuts would be enough to meet
all commitments.
Analysts approved finance ministry decision to set a definite date as this would create transparency for market participants, considering 2010 as a realistic date. Notwithstanding, economists warned that as some important reforms, including the pension system and public finances reforms, are still not sufficiently advanced, the country would not be probably able to meet the single convergence criteria it violates – that for public finance deficit not exceeding 3% of GDP.
Budget deficit is expected to reach 4.6% and 3.8% of GDP in 2005 and 2006 respectively. In addition, experts warned that premature euro adoption might pose risks to the Czech economy as it has to be strong enough and
converged to European economies in real terms in order not to undermine the common monetary policy
objectives. Still, PM Jiri Paroubek said that he is to announce officially the target year after talks with
CNB governor Zdenek Tuma on Sep 5.