According to data from the Czech National Bank, at the beginning of the holiday season, for the first time in history, half of corporate loans were in euros. European currency loans are cheaper thanks to lower interest rates, which are up to four times lower than before. “The demand for euro loans is logical, because the difference in interest rates is huge today … but there is also always a need to take into account exchange rate risks,” says Peter Dvorak, President of the University of Economics in Prague. Český rozhlas Plus.
Peter Dvorak, Dean of the University of Economics | Photo: Petr Topič | Source: MFDNES + LN / Profimedia
Potential exchange rate risks can be illustrated by the case of Hungary. There, people borrowed and got mortgages in Swiss francs, but then they ran into big problems when the exchange rate changed dramatically.
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It is said that banks are trying to provide such loans only to those who have income in euros. “But they also have to take into account the exchange rate risks. I will not underestimate it at all, because the evolution of the corona exchange rate in the future is very uncertain, and I think that the risk of a certain weakening of the corona exists and is not at all insignificant,” warns Dvushak.
According to the Eurobarometer, the popularity of the euro is growing in the Czech Republic. Almost half of Czechs can imagine paying with this currency. Starting from the new year, Skoda Auto will switch to the euro as a functional currency, as it is traded mainly with the eurozone. The government wants to enable accounting and tax payment in euros.
“We must ask ourselves how much a separate crown has helped us at this moment, or vice versa.”
Peter Dvochak
This may be the first step towards the so-called Europe, when the Czechs switch to the euro without officially adopting it.
“We must ask ourselves how much the separate crown has helped us at this moment, or vice versa. We see that, on the one hand, our central bank can react to interest rates, which is confirmed by proponents of a separate corona, but on the other hand, we also see that we have here Risks associated with the exchange rate, which is the uncertainty. We also have different conditions here, which do not exist in the eurozone.”
According to Dvořák, the situation is changing and we must take into account that the natural transition to the euro is already here and it is a very important factor. “However, we must not forget that the situation today – unlike in the past few years – we may not be in such a position in terms of terms that we can even join the eurozone.”
What do current developments this past holiday month say about how well we have managed moderate inflation? What does the change in ECB strategy mean for us and our inflation? Listen to the full audio Money Talk. Hosted by Václav Pešička.
