Zavedení Eura v České republice

Before it can join the euro area, the Czech Republic, just like any other EU Member State not using the euro, has to fulfil the convergence criteria – also known as the Maastricht convergence criteria – set out in Article 121 of the Treaty establishing the European Community.

These convergence criteria can be divided into budgetary criteria and monetary criteria. The budgetary criteria stipulate the maximum ratio of the annual government deficit and government debt to GDP. The monetary criteria are related to price stability, long-term interest rates and exchange rate stability. A prerequisite for fulfilling these criteria is sustainability, i.e. not only one-off fulfilment at the moment of envisaged accession to the euro area.

The Maastricht criteria were adopted in an effort to secure the long-term sustainability of the common monetary policy and the ability of Eurozone members to function without their own monetary and exchange rate policies.

For the common monetary policy to operate optimally throughout the Eurozone, certain alignment between economic levels and trade cycles across the Member States has to be achieved.

Table 1: State of fulfilment of Maastricht criteria by the Czech economy

In addition to these criteria, the Treaty also stipulates the obligation of compatibility of the legal regulations of each of the countries with those of the European Community. This in particular concerns the requirement to achieve independence of the national central bank and to ensure that its statutes and the legislation governing its status are fully compatible with the Treaty establishing the European Community and the Statute of the European System of Central Banks (ESCB) and the European Central Bank (ECB).

Government finance
Price stability criterion
Long-term interest rates criterion
Exchange rate stability

Assessment of the government deficit criterion

The Czech Republic has been experiencing long-term problems with meeting the government deficit criterion. Nevertheless, the budget compiled for 2008 anticipates a reduction in the deficit to below the required 3% of GDP, and the Government is contemplating decreasing the deficit further to 2.6% of GDP in 2009 and 2.3% in 2010.

The government deficit criterion states that the ratio of the planned or actual government deficit to gross domestic product (GDP) at market prices must not exceed the reference value of 3%. The exception is the situation where the ratio is declining significantly and approaching the reference value or where the reference value is exceeded only exceptionally and temporarily, with this excess being close to the reference value.

The excessive budget deficits recorded by the Czech Republic were also in breach of its obligations under the Stability and Growth Pact, which requires EU Member States to achieve stipulated mid-term government deficit targets. For this reason, the Czech Republic has been subject to the so-called excessive deficit procedure since 2004. This procedure is initiated when an EU Member State exceeds or will exceed the 3% limit for the budget deficit. The Government’s convergence programme of November 2007 contains an obligation to stabilise public finances and maintain the government deficit under the required 3% level, with a gradual tendency to decrease the budget deficits further.

Assessment of the government debt criterion

The Czech Republic has been meeting the government debt criterion over the long term. The value of government debt has been hovering around 30% of GDP, which is significantly below the reference value for this criterion.

The government debt criterion stipulates that the ratio of government debt to gross domestic product (GDP) at market prices must not exceed 60%, except in cases where this ratio is declining towards the reference value at a satisfactory pace.

Table 3: Government debt (ESA 1995 methodology,  in % of GDP)

 The factoring in of the majority of the Government’s indirect liabilities (government guarantees) and the transformation of the agencies Česká inkasní and Česká konsolidační (the Czech Collection and Czech Consolidation Agencies) into government institutions caused a sudden increase in government debt in 2003. Since then, the ratio of government debt to GDP has successfully been stabilised, with fast economic growth contributing to this.

Assessment of the price stability criterion

The Czech Republic has been meeting the price stability criterion over the long term. In 2008, however, a significantly higher rate of inflation was expected due to a combination of factors. Indirect taxes were changed (an increase in the reduced VAT rate, the introduction of an environmental tax) as part of a public finance reform. At this time, energy and food prices were also growing. The Czech National Bank is expecting price levels to stabilise at the end of 2008.

The price stability criterion stipulates that a Member State must achieve sustainable price stability. The reference value for price stability is determined as the 12-month average inflation rate in the three European Union Member States with the lowest inflation rate for the observed period plus 1.5 percentage points. Inflation is measured using the harmonised index of consumer prices (HICP).

Table 4: Harmonised index of consumer prices (average for last 12 months, growth in %)

Assessment of the long-term interest-rates criterion

The Czech Republic has been meeting the long-term interest-rates criterion over the long term. It appears that there should be no problem meeting this criterion going forward. An important prerequisite for meeting this criterion is maintaining the trust of the financial markets in the government’s ability to carry out a successful consolidation of public government finances.

Table 5:10-year interest rates on government bonds on the secondary market (average for the last 12 months, in %)

Assessment of the exchange rate stability criterion

The Czech Republic does not currently participate in ERM II, which means that it is not possible to formally assess the exchange rate criterion. It is possible, however, to assert that due to the appreciation trend of the Czech koruna, this criterion would be met, as opposed to a situation where the currency would be weakening on a continuous basis.

The exchange rate convergence criterion requires that the currency be part of ERM II for at least two years. During this period, the exchange rate should, without severe tensions, stay close to the central rate, without devaluation.

The exchange rate stability criterion, along with its impact on the Czech economy, was assessed in the document entitled ERM II and the Exchange-Rate Convergence Criterion [Kurzový mechanismus ERM II a kurzové konvergenční kritérium] published by the Czech National Bank in 2003. This document concludes that staying in ERM II for more than the minimum required period of two years is not deemed desirable or beneficial to macroeconomic stability.