Able but unwilling, willing but unable: Central Europe’s euro dilemma

Although all EU members except Denmark are legally obliged to adopt the euro, Bulgaria and Romania are the only ones currently seriously pursuing membership of the currency club. Three Central European holdouts – Poland, the Czech Republic and Hungary – show little enthusiasm for the single currency despite two decades in the bloc. Once the Balkan pair make the leap, this stubborn trio will join only Denmark, with its formal opt-out, and Sweden, with its artful procrastination, as the EU’s remaining euro-free territories.

“For the twenty-first time, the government has decided not to set a date for the introduction of the euro” – this refrain has echoed through Czech politics, whether the government leans left or right, populist or technocratic, notes Hospodářské noviny commentator Luděk Vainert. Despite its pre-accession pledge, the Czech Republic remains outside the eurozone, according to an annual report by the finance ministry and the central bank. Vainert suggests that the “increasingly demanding argumentative gymnastics” required to justify this position have become strained, particularly as the country now meets the remaining Maastricht criteria following the fall in inflation, including convergence of long-term interest rates and fiscal stability. He highlights how many Czech companies have already effectively relocated to the eurozone – to which the export-driven industrial economy is umbilically linked – through their borrowing and invoicing practices.

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Corporate pragmatism meets monetary patriotism

Writing in the same paper, Pavlína Žáková, deputy minister for European affairs and a former economist at the European Commission, makes a similar criticism, pointing out that more than half of corporate loans are now denominated in euros. According to Žáková, arguments against adopting the euro based on insufficient economic convergence have become obsolete as the Czech Republic has reached 87% of the eurozone average, surpassing Greece, Portugal and Spain. She argues that adopting the euro would bring significant savings to businesses and citizens, while increasing the country’s economic stability amid geopolitical uncertainty.

According to České noviny, Czech business leaders are decidedly pro-euro, with nearly 70% of company CEOs believing that adoption would have a positive impact on their business. They argue that the single currency would facilitate greater economic and security integration – a significant advantage in an era threatened by trade wars and requiring significant defence investment.

This attitude contrasts sharply with public opinion. According to a Czech Radio poll, 72% of Czechs are against adopting the euro. Vojtěch Dvořáček of the iRozhlas news platform suggests that these voter attitudes, reflected in the positions of political parties, indicate that the Czech Republic is unlikely to make significant progress towards euro adoption even after the October general elections.

Writing for the news portal Forum 24, economist Martin Procházka argues that even overwhelming public opposition should not prevent the introduction of the euro. He says that most ordinary citizens do not study or engage deeply with the issue, instead borrowing their positions from political leaders. “Unfortunately, pro-European voices have been silent on the euro, while eurosceptics have been vocal,” Procházka writes. “Thus, in the course of twenty years, a 70% majority in favour of the euro has turned into an equally large majority against it.” He points to a striking paradox: in Slovakia, which joined the eurozone in 2009, support for the single currency is almost 80%, despite the country having an “openly pro-Russian government and electoral preferences that are generally detached from Europe”. Procházka calls for an end to “extremely unproductive and uninteresting discussions” that either emotionally defend the Czech crown or constantly wait for the “right moment” when adoption becomes advantageous.

Poland’s euro double bind

A similar situation, where pro-European groups remain silent on the euro and cede ground to Eurosceptics, prevails in neighbouring Poland, where up to 74% of Poles are against adopting the single European currency, according to a poll cited by Gazeta Wyborcza. Moreover, last year’s survey by Rzeczpospolita found that Poland’s business elite was unenthusiastic, with only 48% of heads of medium and large companies supporting the introduction of the euro.

By contrast, most of the respected economists interviewed by Rzeczpospolita’s Mikołaj Fidziński are in favour of Poland joining the eurozone after meeting the convergence criteria. However, these economists believe that membership is unrealistic in the coming years because the criteria have not been met – the public deficit exceeds 3% of GDP and will not fall below this level until 2028, public debt is approaching 60% of GDP and the country does not meet the requirements for price and interest rate stability or exchange rate stability.

Supporters of the euro cite geopolitical advantages: better anchoring in the EU, protection against an irresponsible Polexit and greater security amid regional conflicts. Economist Andrzej Sadowski, president of Poland’s Adam Smith Centre, disagrees, telling the tabloid Fakt that Poland should “avoid making the same mistake as Estonia”, which adopted the single currency for purely political and security reasons due to its proximity to Russia, allegedly to the detriment of its economy. According to Sadowski, Poland should “adopt the euro only when it has reached a level of development comparable to that of the leading EU countries”.

Rzeczpospolita commentator Tomasz Kubin calls for meeting the convergence criteria – which are beneficial in themselves – and adopting the euro because “in today’s globalised world we will only survive as an integrated community, with the single currency as one of its instruments”. Kubin finds Sweden’s approach even more worrying: although it has not negotiated a derogation from the eurozone, it is deliberately failing to meet the “political” aspects of the convergence criteria, despite being better prepared economically than most eurozone members. He criticises the European Commission for not addressing this breach of the principles of loyal cooperation by referring Sweden to the European Court of Justice, effectively tolerating deliberate non-compliance as a means of avoiding euro adoption without a legal basis. As for Poland, even Kubin sees no imminent adoption of the euro, which requires not only fulfilment of the Maastricht criteria and a change in public opinion, but also constitutional amendments requiring a two-thirds parliamentary majority.

In Hungary, “No forint means no forint risk”

In Viktor Orbán’s Hungary, which is increasingly at odds with the European mainstream, opinion polls show similar figures – but with a striking twist. According to a survey commissioned by 24.hu last year, nearly 70% of Hungarians support adopting the euro, cutting across socio-demographic divides and even including ruling Fidesz party loyalists. This enthusiasm has been growing steadily for half a decade.

“No forint means no forint risk,” argues Zoltán Tork, an economist writing for the G7 news portal. He sees euro adoption as crucial to taming Hungary’s economic vulnerabilities – notably inflation (the highest in the EU) and persistent currency depreciation. The forint, says Mr Tork, has long been the economy’s Achilles’ heel, its unpredictability making it catnip for speculators. Financial heavyweights can easily exploit its relatively liquid but loosely regulated nature to manipulate exchange rates to their advantage. The euro would remove this perennial source of instability.

Not everyone is convinced. Writing in Magyar Némzet, a newspaper with close ties to Mr Orban’s government, Philip Pilkington of the Hungarian Institute of Foreign Affairs offered a very different perspective. The euro, Pilkington argues, is a political Trojan horse rather than an economic necessity – a power grab by Brussels masquerading as monetary policy. He warns that adopting the single currency would rob Hungary of its sovereignty and subject its economic decisions to unelected eurocrats. Opposition figures like Péter Magyar, who advocate euro adoption, are merely exploiting public frustration over the depreciation of the forint, he argues. Contrary to popular belief, Pilkington argues that a weaker forint actually strengthens national competitiveness and maintains a robust labour market.