By Peter Laca, Krystof Chamonikolas and Kriti Gupta (Bloomberg 11. 6. 2025)
The Czech central bank governor touted the benefits of his country’s currency, saying that the koruna puts it in a better position to moderate price-growth than the euro would.
“By using independent monetary policy, we are able to have very low inflation for a very long time,” Aleš Michl told an event hosted by Bloomberg in Prague on Tuesday. The koruna has served the Czech economy well and, as a strong currency, has a critical role in taming price growth, he said.
The euro has struggled to gather allure in the Czech Republic, one of the biggest countries on the doorstep of the euro area, even as the region gradually expands eastward on a promise of stability and a boost to economic growth.
Bulgaria last week received the nod to switch to the euro in 2026, a key milestone for the poorest nation in the European Union. The country, which started working toward adoption almost two decades ago, is set to follow Croatia and other smaller members like the Baltic states and Slovakia.
Bulgaria’s rush to embrace the common currency is now more of an exception than a rule in the EU’s east, where all the countries are obliged to eventually switch to the euro. The four largest of them – Poland, Romania, the Czech Republic and Hungary – are either struggling to fulfill the entry conditions, lack the political will to join, or both.
Some European officials see the threat of global trade wars as a chance to strengthen the euro’s international role, but loose fiscal policies and memories of the Greek debt crisis are making parts of EU’s east unable or reluctant to ditch national currencies.
The Czechs stand out in the group with their key industries already highly integrated in the euro area and on the path to meet most of the criteria. The country sells two-thirds of its exports to the euro region, has one of the EU’s lowest debt piles relative to the size of the economy, a budget deficit below the bloc’s limit and inflation near the 2% target.
But along with opposition from the main political parties, the central bank is also among those arguing against giving up the koruna and the monetary powers that come with it, at least for now.
Officials say the euro isn’t an automatic fillip to growth and that having an independent monetary policy acts as a buffer against global shocks. That overshadows potential benefits like elimination of the conversion costs or currency risks for businesses.
“Our goal is price stability, not to help exporters, not to help investors, not to have cheap loans,” said Aleš Michl. “I would like to support savers. That’s my vision, and it’s a noble one.”
Croatia and Bulgaria are in a different position. Croatia relies more than any other EU state on tourists and has benefitted from the elimination of an exchange rate. Most private and corporate bank deposits, meanwhile, were held in euros even before entry, along with more than two-thirds of debt.
“It seems reasonable to adopt the euro,” Croatian central bank chief Boris Vujcic said at the same panel in Prague. “It has served us well.”
Bulgaria, meanwhile, has relied on a currency-board regime for almost three decades, with the lev pegged first to the Deutsche mark and then to the euro. A seat at the European Central Bank will actually give the country more influence over its monetary policy.
Despite resistance among its leaders, the single currency is already playing a large role in the Czech economy, too. The biggest companies have been increasingly taking euro loans to lower their interest payments, as well as to avoid the financial pain of currency swings and conversion fees.
Skoda Auto AS, the biggest manufacturer, shifted its accounting to the common currency in 2023 because the unit of Volkswagen AG sells most of its cars in Western Europe and pays many local suppliers in euros.
Households and smaller business owners don’t have access to cheap loans in euros and they have to convert korunas when traveling abroad. The four most popular destinations for Czech tourists are Croatia, Slovakia, Italy and Austria, all euro countries.
The inconvenience, and rising geopolitical fears after Russia’s full invasion of Ukraine in 2022, are now making the common currency more popular among the public. About 80% of Czechs opposed joining the euro in 2013, during the European debt crisis. They were split down the middle last year, according to the European Commission’s annual surveys.
In their last joint report on readiness to adopt the euro, the Finance Ministry and central bank recommended not setting a target date. There’s also the prospect of a change of government after an election in October, with Prime Minister Petr Fiala’s Civic Democrats trailing in the polls to the ANO party of populist billionaire Andrej Babiš. Both oppose giving up the koruna.
“We don’t need the euro,” Babiš said in a video on his Facebook account. “We need the Czech koruna, which is one the best currencies in Europe.”
The advocates of euro adoption point to the post-pandemic surge in consumer prices, which sent Czech inflation to 18% and well above the euro-area’s peak. Opponents say that Czech policymakers were able to start raising interest rates much earlier than their counterparts in Frankfurt, helping to bring inflation back to target more quickly.
Aleš Michl, the central bank governor, said the right time for joining the euro would be when the benefits of having a Czech currency fade. That could happen when most loans are in euros and monetary policy effectively stops working, or if a weaker koruna pushes up the cost of imports and fuels inflation.
“Right now, we have strong koruna, we are fighting against inflation,” he said. “And this adjustment mechanism, it seems to be, still works.”
With assistance from Jasmina Kuzmanovic and Daniel Hornak.