The governor of the Czech Central Bank, Aleš Michl, is putting the brakes on scenarios of rapid euro adoption, warning that a premature entry into the eurozone poses serious risks for the country's economy.
In an interview with the Financial Times, the Czech central banker characterized the pressure exerted for the euro as "inopportune", emphasizing that the Czech economy has not yet converged sufficiently with the Eurozone. As he argued, a hasty currency change risks triggering a new round of inflationary pressures, dragging up wages and operating costs of businesses, at a time when Prague is fighting for price stability.
Interest rate cuts
In an interview with the Financial Times, Aleš Michl reported that recent calls by Prime Minister Andrej Babiš for interest rate cuts were in complete contrast to the central bank's efforts to tame inflation, while he also criticized President Petr Pavel's push for euro adoption.
Babiš, a billionaire businessman who has often expressed his admiration for US President Donald Trump, has evolved into a "catch-all prime minister who follows a Trump-style idea: the cheaper the money, the better," stated Michl. Trump consistently asks the Fed to cut interest rates.
Yielding to Babiš's pressure would endanger price stability in the Czech Republic, Michl stressed.
"No" to the euro
However, the Czech central banker was equally critical of Pavel's campaign in favor of the euro, warning that the economy has not yet converged sufficiently with that of other Eurozone countries to make the adoption of the common currency advisable, despite the significant progress made since Czechia joined the EU in 2004.
A premature move, he argued, could fuel inflation by raising wages and other costs.
Michl noted that the Czech National Bank (CNB) must remain "independent from both sides" in what he described as a "battle of inopportune ideas" between Babiš and Pavel regarding the economic future of the country.
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