(Repeats story published late on Tuesday)
By Jan Korselt
PRAGUE, Dec 16 (Reuters) - The Czech Republic has moved
toward meeting euro entry criteria and its economy has become
more aligned with the euro zone's this year, a joint central
bank and government document said on Tuesday.
The cabinet discussed future steps toward euro adoption on
Tuesday while debating the annual study, and refrained from
setting an entry date, as expected.
It hinted, however, the Central European country could take
steps toward euro adoption next year and said the annual
assessment will be done in October, a couple months early.
"This year, there has been certain positive movement from
the point of view of future compliance with the Maastricht
convergence criteria and also partially the economic
convergence," the central bank said in a statement on the
document.
The Maastricht criteria set limits for euro hopefuls on
government debt, interest rates, currency stability and
inflation.
The Czechs, who have enjoyed low interest rates and a strong
currency in recent years and avoided banking sector collapses,
have not set a firm euro entry date, saying they would first
have to ensure they join at an appropriate time.
Analysts expect 2013 to be the earliest possible entry point
for the Czech Republic.
The cabinet also removed an explicit reference in the
analysis to avoid setting an entry date now and not to join the
pre-euro ERM-2 exchange rate mechanism next year, hinting that
more concrete steps such as setting a target date could be taken
toward the end of 2009.
This was done amid pressure from two junior partners in the
three-party, centre-right coalition who are much more keen on
quick euro adoption than the main ruling party, the rightist
Civic Democrats.
"We dropped this text and then the document was adopted
unanimously," Deputy Prime Minister Martin Bursik told a news
conference.
"The matter is open and it will be a matter of political
discussion among the coalition partners."
The analysis said the financial crisis was a temporary,
unfavorable factor for euro adoption.
"In these conditions, the outlook for meeting the Maastricht
convergence criteria and mainly maintaining and raising the
level of achieved convergence of the Czech economy with the euro
zone is highly uncertain," the bank said.
Exchange rate volatility sparked by the crisis could make it
"very difficult" to meet the criterion of exchange rate
stability, which sets limits for currency swings within the plus
or minus 15 percent ERM-2 band, the central bank said.
The financial crisis has hit Hungary, a fellow Central
European EU member, which has had to tap funding from the
International Monetary Fund and the EU to avert a balance of
payments or banking crisis.
Hungary and other countries have begun to favor quick euro
adoption in order to protect their economies from market
turmoil.
The analysis also showed public deficits would remain safely
below the limit of 3 percent of gross domestic product, although
long-term fiscal stability and removing structural deficits
remained a challenge.
(Writing by Jan Lopatka; editing by Michael Winfrey, Gary
Crosse)
