Czech currency and plans on the euro adoption

2017-11-28 10:29:54

The koruna is the official currency in the Czech Republic. It has been used in the country since 1993. At the present time the pan-European currency euro is accepted all over the republic, however, there are some losses in the exchange rate.

Geller

1 koruna is subdivided in 100 gellers used only in case of electronic money transfers or payments. Regular calculations in the Czech Republic are performed by rounding up the amounts to the whole korunas.
The smallest coin in the country is 1 koruna and the largest banknote is 5000 korunas. The 1000 korunas banknote became the most protected banknote in the world.

Rate

On the 7th of November, 2016 the Czech National Bank made the decision on the investments on the currency market and kept the rate of the koruna to the euro approximately on the level of 27 korunas to 1 euro.

The Czech National Bank (CNB) administration terminated the regime of foreign exchange interventions in April, 2007. Therefore, the CNB ceased to prevent strengthening of the Czech koruna below the threshold of 27 korunas to 1 euro.

Despite this, the bank already announced that it is ready to mitigate any excessive fluctuations in the currency exchange rate using its instruments.
The koruna has strengthened up since the end of the CNB interventions. Current exchange rate is 26 korunas to 1 euro (the exchange rate of the koruna to the US dollar is 22).

The mentioned actions were aimed to stop deflation and to get back to 2% inflation. This step should help the Czech Republic to reach the economies of the developed European countries. Currently, there is a significant growth in the economy and solvency of the domestic market.

Euro

The Czech Republic took the responsibility to adopt the euro currency when joined the EU in 2004. The country follows the national plan on the euro adoption, approved by the authorities in 2007. This plan consist in a set of actions in particular areas of the economy that are aimed to the euro adoption and joining the eurozone. To date, the Czech Republic fulfilled almost all requirements to adopt the euro. The ones that are not yet met are: stabilization of the prices and the exchange rate as well as strengthening the state budget. The deadline for the euro adoption has not been officially discussed yet.

Possible benefits of adopting the euro currency:

  • comfortable and cost-effective transportation around the EU countries;
  • value of savings (due to absence of the inflation);
  • reduced price for money transfers;
  • international transfers take less time and are easier to perform;
  • lower mortgage and credit rates;
  • simple analysis and comparison of prices in different EU countries;
  • protection against the exchange rate fluctuations to the euro;
    participation of the Czech Republic in the euro exchange discussions;
  • The Czech National Bank is a part of the European Central Bank;
  • advanced control over budgetary discipline as the Czech budget is no longer considered separately, but as the European budget.

The euro adoption is beneficial not only for the EU to create the united economic area and to establish the additional control over the countries-participants, but also to industrial groups whose interests lay in absence of exchange rate fluctuations, increase in transparency of trade as well as quality and volume of business.

Moreover, more cost-effective money transfers will make the international investing and tourism more common. All these reasons are profound for successful business of the local companies both Czech and foreign ones with offices on the Czech territory.

The Czech Republic unlike Denmark and the Great Britain (that is leaving the EU) is legally bound to adopt the euro even if the deadline has not yet been established, because this commitment served in due time as a guarantor of its joining the union.

The referendums suggested by different political parties about the adoption of the euro cannot prevent the country from it: the Czech Republic will have to leave the union if the euro is not adopted. As an example of Slovakia shows (once the euro was adopted its economy reached the level of the Czech one), such an economic change can have quite positive impact on the development of the republic and make it closer to the developed countries of the European Union.

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