Final Word from Monday, November 26, 2007

A simplistic way to look at the euro issue is to say that the adoption rate could be Kč 25 or Kč 35, depending on what happens next. Those who say the Czech economy is ready now would tend to believe the stronger value, while those who want serious economic reforms before the euro takes effect tend to expect the crown to weaken. Without reforms, investors could start cutting their spending and increasing their repatriation of profits, which would drive down the crown. CNB Vice Gov. Miroslav Singer told MFD that the CR has reached its growth ceiling and that the party is coming to an end. Gov. Zdeněk Tůma told FAZ that it could be catastrophic if the CR kept its 3% budget deficit and the 5-6% growth rate started to decline. It's clear that the CR can't adopt the euro before 2012, but with no serious reforms in sight, the time to convert your crowns might conceivably come as soon as next year.[Czech Republic MF Dnes Czech National Bank governor Frankfurter Allgemeine Zeitung European Union appreciation depreciation]


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