We Are Not Building a House of Bricks

15. 3. 2017

By joining the European Union the Czech Republic committed itself to, among other things, joining the eurozone, a commitment endorsed by a referendum. Holding another popular vote on the issue of joining the common currency is therefore unnecessary. What is necessary is for those responsible to decide when our country will meet this commitment.

In addition, those responsible also owe us an explanation as to how our membership in the economic and currency union will be handled politically. The Czech Republic meets the criteria of price stability, state of public finance, and interest rate convergence. The country has not met the criterion of participating in the exchange rate mechanism because it is not a part of it. What also needs to be taken into account in deciding to join the eurozone is, of course, the degree to which our economy is interlinked with the eurozone as well as our ability to adjust to potential asymmetric shocks without a currency policy of our own. This certainly is not now, and will not be, a small matter.

In the long run, the high degree of openness of the Czech economy and its interconnectedness with that of the eurozone argue for joining the club of countries that have adopted the euro. On the other hand, by joining the eurozone we will incur certain expenditure resulting from the fact that the economic situation across the eurozone has yet to fully recover from the global (including European) financial and economic crisis. If we joined now we would have to bear a larger share of the costs of fixing the public finance of the entire eurozone than before.

Domestic political interests also play a role here. Many businesses benefit from being outside the economic and currency union – they can pay lower wages and make bigger profits. This is particularly true of large companies with the greatest numbers of employees, whose influence cannot be underestimated. For the Germans we are cheaper outside the eurozone, so they are not complaining either, having invested heavily in this country. To this we must add the public concern about introducing the common currency, which has been fostered for a long time, as well as additional “home-grown” arguments.

The changes associated with the adoption of the euro will be painful but the wound will heal and the pain will cease. The Slovaks have managed and so will we.

The entire Czech polity claims in unison: we will join the euro but only when it is advantageous for us. But when will that be? Economics is a social, rather than natural or technical science, whose data input and all other useful information can be measured, weighed, and added up until a precise result is reached. Finding a suitable date for joining the eurozone is a different kind of task, since a D-Day that will involve only advantages but no cost or difficulties, will never come. (Who knows what might happen tomorrow?) And since it will never be possible to determine the ideal date in advance, we must decide now where we really want to be and, if it is inside the eurozone, we must set a date ourselves. We are not building a house of bricks, we are deciding our country’s future direction.

Purely in economic terms our country is more or less, if not completely, ready. The eurozone, as the most profound form of integration, is not only an economic but also a political project. Its members take decisions that have an impact on the entire European Union. Within the EU, a consensus among the club of nineteen countries represents a powerful majority that cannot be circumvented, legally or politically. It simply has to be accepted and followed. It is not a free choice but rather a “hard test” of unity.

When we complain about eurozone countries telling us what to do, what we hear in reply is: Why don’t you join us, then? Welcome to the club.

The processes currently taking place within the EU have been amplified by Britain’s decision to leave. Being the second largest market in the EU, the UK is a force outside the eurozone that larger EU countries have had to reckon with. The latest development has weakened the position of the countries outside the eurozone, including Britain. Without London‘s Anglo-Saxon counter-balance the EU will be dominated by the Berlin–Paris axis. Efficient continental bureaucrats will no longer have to deal with Anglo-Saxon common sense. Even the Brits will have to learn to adjust more than before if they want to enjoy full access to the single European market.

The question is: what will benefit our country more in strategic terms and what is in harmony with our general interests? I believe that the Czech Republic will derive greater benefit from being politically in the same place as the founding countries of European integration, the good old “six,” than from staying outside. Being more or less in the same place as Germany, France, Italy, and the Benelux countries, i.e. the core of Europe, is more beneficial for us than a fixation on the Visegrad grouping. The separatist trend towards forming a “union within the Union” is, in my view, a fundamental mistake.

The dynamically evolving political atmosphere of Europe has no impact on the strategic direction of our country. We must not be guided by reasoning dictated by social engineering or by educated guesses as to who might win the next election in this or that EU country. We must set our sights on the long-term future, unfettered by the present moment.

Our political representatives assure us that we are not headed for the East. That is why we should join the eurozone, despite all the risks this entails. Because the eurozone is the West. Nothing, particularly politics, should be done half-heartedly, and wherever we end up in difficult times, we will find it easier to live once the times improve.

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