The main threat is the budget deficit. Most political leaders want the country to enter the ERM II exchange-rate mechanism in 2013.
- Meeting the Maastricht criteria has not been the Czech Republic’s priority in the past few years since governments preferred to have a wider fiscal playing field.
- Finance Minister Eduard Janota of the Civic Democratic Party (ODS) says 2015 is the earliest possible date that the Czechs could adopt the euro, although he deems 2016 more attainable. The government’s current plan sees the Czech Republic entering ERM II in 2013. The critical factor will be the budget deficit, which must be reduced to less than 3% by then. The deficit hit 6.6% of GDP in 2009 thanks to the government’s economic stimulus measures. The Finance Ministry forecasts that the deficit will be 5.3% of GDP this year.
- All mainstream parties seem determined to consolidate finances, so whoever wins the May parliamentary elections should have enough resolve to meet the Maastricht criteria by 2014 at the latest. The Czech Social Democratic Party (ČSSD), which currently leads opinion polls, has begun talking about 2016 as their target date for adopting the euro, which seems more realistic than 2015.
- The European Commission issued the same criticism to the Czech Republic as it did to Romania: The country’s convergence plan lacks measures to bring the deficit down to 3% of GDP by 2013, which means the sustainability of Czech finances is not guaranteed. The Czech caretaker administration will have to present its proposals by mid-May. The task of enacting them will fall on the shoulders of whoever wins the May 28-29 election.
Inflation is extremely low, registering just 0.4% in February. The benchmark interest rate is also low at 1%. The debt-to-GDP ratio is safely within the Maastricht criteria at 34.8% of GDP in the third quarter of 2009.