Munich Personal RePEc Archive

Czech Republic in Respect of the Real Convergence

Tuleja, Pavel (2007): Czech Republic in Respect of the Real Convergence. Published in: Future of the European Monetary Integration (17. October 2007): pp. 830-842.

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Abstract

In spite of the fact that the Czech Republic, on its entry into the European Union, undertook, within the shortest possible time limit, to meet all the terms and conditions which are required for adoption of the common European currency, the Euro, it is apparent at the present time that the Czech shall not be able to meet this undertaking until 2012. The unfavourable situation of the Czech public finances, due to which the Czech economy is not able to comply with one of the nominal convergence criteria, that is, the government deficit criterion, can be regarded as one of the major causes of this delay. Although the degree of compliance with the Maastricht nominal convergence criteria appears to be the critical factor for acceptance of a country into the Euro Area, which also showed when the Lithuania’s last year’s application was declined, in our opinion, the country’s compliance with the real economic convergence criteria is far more important on its entry into the Euro Area. Therefore, we have devoted our contribution to these problems, wherein we have focused on the assessment of real dispositions which shall enable the Czech to keep all its positive effects ensuing from its membership in the Euro Area. Within the analyses which we have completed, we have arrived at the conclusion that in the upcoming five years the Czech economy will need to undergo quite a dramatic process of convergence with the Euro Area’s economy, since the current state of its real convergence is accompanied by a myriad of risks, which in case of an early adoption of the Euro might result in severe economic trouble.

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