Czech Leaders Clash Over Euro Path as Zeman Urges Fast Entry

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Bohuslav Sobotka
Czech Prime Minister Bohuslav Sobotka. Photographer: Martin Divisek/Bloomberg

The head of the Czech government clashed with his finance minister over whether the country needs a referendum on euro adoption as the public debate escalates about merits of ditching the national currency.

The ex-communist nation doesn’t have a target date for the currency switch and the majority of the population rejects the move. Finance Minister Andrej Babis suggested on Sunday that a non-binding referendum on euro adoption be held together with parliamentary elections in 2017. Prime Minister Bohuslav Sobotka rejected the idea, saying Czechs have already pledged to enter Europe’s monetary zone as part of their country’s European Union accession agreement.

With the recent global economic crisis and Greece’s debt spiral devastating support for joining the common currency in some of the EU’s newest members, debate has reignited in the Czech Republic and Poland over whether to do so quickly or to put it off. The meeting was part of a euro-adoption debate ignited by Zeman this year. The president has been calling for a quick entry to the single-currency area.

“We have committed to adopting the euro,” Sobotka said on public TV after meeting with Babis, President Milos Zeman and central bank Governor Miroslav Singer at the president’s summer residence at chateau Lany, about 40 kilometers (25 miles) from Prague, the capital. “I think there is nothing to hold a referendum about.”

Public Opinion

While Sobotka says sharing the currency with the Czech Republic’s largest trading partner would benefit the economy, he’s said his coalition cabinet won’t set the target date because of opposition by Babis’s ANO party to the move and negative public opinion. Sobotka also leads the Social Democratic Party.

“I understand there is some coalition tension, ANO is rather skeptical about the euro, Social Democrats are rather optimistic,” the public TV’s website quoted Zeman as saying.

Central bankers, including Singer, have stressed they have only an advisory role in the process. Singer has said maintaining the nation’s own currency helps the economy absorb shocks from abroad.

The Czech koruna has lost 5.9 percent to the euro since November 2013 when the central bank weakened it with market interventions and set a cap on its gains at a level “near” 27 per euro. The currency traded little changed at 27.432 against the euro at 10:46 a.m. in Prague on Monday.

Board member Jiri Rusnok, whom Zeman selected as his top candidate to lead the institution after Singer, has spoken in favor of euro adoption. Rusnok also said that a 2020 switch date given as an estimate by Sobotka’s Social Democrats was too optimistic.

The Czechs are among Europe’s biggest opponents to euro-area membership, with 69 percent against and 24 percent in favor in a survey by pollster CVVM published on May 12. No margin or error was given.

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