A recent study conducted by Deloitte as part of the “Czech Best Managed Companies” programme, aimed at promoting the international expansion of Czech private companies, found that many companies see Eurozone membership not only as an opportunity towards integration with the European market but also as a means of mitigating the risks associated with currency fluctuations.
Towards the introduction of the euro
The Czech Republic is approaching a historic moment with the potential adoption of the euro as its official currency. Although the adoption of the single currency is an obligation stemming from the Treaty of Accession to the European Union, the actual date of the transition has not yet been determined.
Recent assessments by the Ministry of Finance and the Czech National Bank (ČNB) show that, this year, the Czech Republic fulfils four of the five Maastricht criteria necessary to enter ERM II. The only criterion not yet fulfilled concerns the stability of the exchange rate, which must be maintained for two consecutive years. From February until October this year, the National Economic and Legislative Council is in charge of assessing the economic and legal impacts of ERM II and euro entry.
A survey conducted in January by the Median agency for Radiožurnál showed that 21% of Czech citizens, mainly students and entrepreneurs, support the introduction of the euro. Kateřina Novotná of Deloitte points out that companies with significant exposure to international markets view the adoption of the euro favourably, aiming to strengthen their development and competitiveness in the European context.
Benefits and risks in adopting the euro
Deloitte’s survey revealed that the adoption of the euro would offer numerous advantages to the Czech Republic. The main benefits include reduced transaction costs and hedging against exchange rate risk, factors that would make trade with other EU Member States more efficient and cheaper. The single currency would also facilitate price comparability between countries, thus improving the competitiveness of Czech companies on European markets. These factors could attract more foreign investment, as the use of a common currency is often perceived as a sign of economic stability and deep market integration. In addition, the changeover to the euro could lead to lower interest rates, increasing the accessibility of credit.
Despite the potential benefits, there are significant business concerns about the risk of having to contribute to covering the debts of other Member States. In addition, the adoption of the euro would mean a loss of autonomy in monetary policy for the ČNB, which would no longer be able to implement independent solutions to specific national economic needs. The management of monetary policy would be transferred to the European Central Bank (ECB), thus limiting the national central bank’s ability to intervene directly.
The Czech Republic faces a significant change with the possible adoption of the euro, an event that could expand its entrepreneurial and commercial capabilities. However, a decision of this magnitude requires a thorough analysis of the potential benefits and associated risks, taking into account the perspectives of the business sector and public opinion. In case this transition should go ahead, it will be necessary to prepare thoroughly and develop a detailed strategy to minimize the risks and optimize the benefits for the national economy. In this context, an open and constant dialogue between the government, businesses and citizens is important to build a solid consensus and ensure a smooth and seamless transition. In the meantime, many companies with strong international exposure are already anticipating this change and preparing to manage the implications of this evolution.
Source: https://www.ceskenoviny.cz/ https://www.camic.cz/
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