Finance Minister Miroslav Kalousek (TOP 09) is due on Wednesday to present the government with the amount his ministry deems the Czech National Bank (ČNB) could contribute to the effort to protect indebted Eurozone member states from insolvency being coordinated by the International Monetary Fund (IMF).
Whereas the EU proposed that Prague put up €3.5 billion, Kalousek says €1.5 billion (approximately Kč 38 billion) is manageable. “Since 2004, the Czech Republic has drawn a total of Kč 176 billion, and I would consider it to be immoral not to contribute to the [financial] aid,” Kalousek wrote in his proposal he will put to the government on Wednesday and cited by the server novinky.cz.
If the government agrees to the proposal, it will provide guarantees to the ČNB to cover any losses in the event of devaluation or write-off of the money lent. The independent central bank — if it agrees to provide the loan — will draw the €1.5 billion from its foreign currency reserves.
‘Skeptical’ Singer to decide
According to novinky.cz, a number of economists agree that €1.5 billion is within the Czech Republic’s current financial means and if granted should not impact the exchange rate of the Czech currency, the crown, and would not represent a dangerous reduction of the central bank’s currency reserves.
If the ČNB refuses to provide the loan, the government will have to seek another solution. After the announcement of the EU’s new plan to top up the IMF’s funds, central bank governor Miroslav Singer recommended extreme caution towards providing an exceptional loan to the the IMF, which a number of commentators said played into the hands of those against the loan and Czech participation in EU monetary and fiscal integration. Singer even cast doubt on the effectiveness of the initiative:
“I am convinced that if the IMF wants to increase its means and at the same time safeguard its exceptional financial trustworthiness, it should, rather than seeking new sources of loans, concentrate on boosting its capital, which in the end would mean increasing contributions,” Singer said in the interview with Hospodářské noviny.
In December 2011, the heads of EU states agreed to provide the IMF with €200 billion under bilateral agreements. To date, however, Eurozone members have pledged a total of around €150 billion. The UK and Bulgaria immediately refused to contribute while the Czechs said they needed more time to consider it.
EU fiscal integration dividing coalition
Serious divisions have emerged within the tri-party Czech coalition government over the EU’s prospective fiscal discipline treaty, which leaders of the EU states within the Eurozone and most other EU member states plan to sign at their next summit on January 31. Last week, Czech Foreign Minister Karel Schwarzenberg, and leader of the second-largest coalition party, TOP 09, said it was in the vital interests of the Czech Republic to remain within the mainstream of European integration — including joining the monetary union.
However, the other two coalition parties — the Civic Democrats (ODS) and Public Affairs (VV) — voted down TOP 09 to adopt a provisional pledge to hold a referendum on signing up to the fiscal discipline agreement, or on eventual adoption of the euro. Kalousek argues the issue of the fiscal discipline agreement is too complicated to be put to the general public. Prime Minister Petr Nečas (ODS) said recently that he is “rather against” conrtibuting to the IMF-led Eurozone bailout fund.
According to a poll conducted from Jan. 18 – 21 by the SANEP agency, 71.3 percent of the Czech electorate would vote against adopting the euro in a referendum on the issue.
