Debate on the Czech Republic’s Entry into the Eurozone: Is it Rational? Economist Lukáš Kovanda Gives His Opinion

photo: Hans Štembera for PrahaIN.cz/Ekonom Lukáš Kovanda

INTERVIEW: Renewed discussions about the eventual entry of the Czech Republic into the Eurozone are somewhat surprising and, according to some experts, have no rational reason. “I don’t understand why the debate on this topic has opened up again. There is no reason to change,” economist Lukáš Kovanda told PrahaIN.cz.

Renewed discussions on the political scene about the eventual entry of the Czech Republic into the eurozone surprised the public and some experts. Most recently, the speaker of the Chamber of Deputies, Markéta Pekarová Adamová, supported the adoption of the euro.

Economist Lukáš Kovanda in an interview for our editors drew attention to some pitfalls of the common European currency. “The euro is a project that still has many question marks. The Eurozone is artificially held together by central banks and has twice the national debt of the Czech Republic. For now, lenders are buying bonds from individual central banks, but that could change. The question therefore arises as to what the Czech Republic would actually gain by adopting the euro. Why should we switch to a currency that is twice as indebted as the Czech Republic? I see no reason for this step,” said Lukáš Kovanda to the editorial staff of PrahaIN.cz.

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When investors run out of patience…

According to him, the adoption of the euro would not change much for ordinary citizens. The biggest change would be in the stores with the price tags. “Of course there are concerns about price increases. We could observe this phenomenon, for example, in Germany. There, the euro was even nicknamed teuero (expensive). Now something similar happened in Croatia. This is due to the fact that some traders have rounded prices upwards when revaluing. But that is not the main disadvantage,” stated Kovanda.

“The euro is a safe currency. But he can quickly take it for granted. The indebtedness of the eurozone countries is really considerable. I don’t mean only Greece, which has five times higher debt than the Czech Republic, or Italy, but also average countries such as Finland and Germany. One day, investors may run out of patience and stop buying bonds,” added the economist.

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The crown stood!

In this context, Lukáš Kovanda pointed out the fact that the crown successfully withstood even in relatively difficult situations. At the same time, he reminded that the transition to a new currency is an operation that will burden the state treasury with significant expenses. “There is no reason for the Czech Republic to join the Eurozone. It turned out that the crown always stood up in all moments of crisis. During the economic crisis, covid and other situations. Therefore, there is no reason to change. In addition, switching to another currency entails relatively high costs that the state must pay. I repeat, there is no reason to adopt the euro, and I don’t quite understand why the debate on this topic has opened again now,” the economist wonders.

“We can think of national currencies as perfectly fitting suits. The central bank can then, for example, control the koruna through precisely tailored interest rates. The Euro is an uncomfortable suit against this, but it can protect you better in crisis situations. But in calm times, it is difficult to operate with him,” concluded Kovanda.

2023-08-06 06:36:41
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