31 October 2023

Bloomberg : The Euro Is Creeping Into a Very Euroskeptic Country

The government has no policy to adopt it, the public doesn’t want it and the central bank is keen to keep control of interest rates.

The commitment to eventually switch to the euro was a key condition of joining the European Union. But after almost two decades, the Czech Republic — like all the largest post-communist members — isn’t anywhere close.

Instead, executives are increasingly taking the matter into their own hands, gradually nudging the economy to a place where politicians and monetary policy makers seemingly don’t want to go.

Figures from the Czech central bank show that for the first time half of all outstanding corporate loans from local banks in the country are denominated in foreign currencies — overwhelmingly euros — and the number is even higher if credit from foreign banks is included. On top of that, about 20% of all domestic trade between Czech companies happens in euros, while many exporters pay their local suppliers in euros instead of koruna.

“The koruna is only a part-time currency because the big businesses dominating the economy have mostly switched to the euro,” said Tomas Kolar, chief executive officer of Linet Group SE, a maker of high-tech hospital beds and other equipment. “There is no good reason not to have the euro, but politicians are afraid to even raise the issue, let alone explain it to voters.”

Almost all of the Czech company’s €360 million ($381 million) of sales come from exports to customers in 150 countries, said Kolar. He’s switched most of his operations from koruna to the euro to minimize the losses from market swings.

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