Adoption of the euro: Why is the Czech approach cautious? |
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Authors: | Kate?ina ?mídková |
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Institution: | (1) Czech National Bank, The Czech Republic |
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Abstract: | When published, the Czech Euro-area Accession Strategy signalled a rather cautious approach to adopting the euro in comparison
to the intentions of other EU acceding countries. The euro adoption was scheduled around 2010 and the ERM II was viewed only
as a waiting room. The Czech strategy was attuned to specific features of the Czech economy. Although inflation and nominal
interest rates converged to the EMU levels before EU entry, large fiscal deficits and the need for significant fiscal reform
did not make it possible to meet the Maastrich criteria soon. Moreover, real convergence was viewed as a priority for the
forthcoming years and, consequently, the strategy was aimed at maintaining nominal flexibility in order to cushion consequences
of price and wage rigidities during the peak period of the catch-up process. |
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Keywords: | |
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