Czech government rejects joining EU’s banking union, wants to maintain financial independence

TIn an updated study, the Czech Ministry of Finance recommended the Czech Republic to not join the European banking union for the time being. As Finance Minister Alena Schillerová stated on Twitter, the government approved the document on Monday. The paper recommends to continue monitoring developments in the banking union and to re-evaluate individual aspects and impacts of the Czech Republic’s accession to the union within three years.

The banking union was created as a response to the Eurozone crisis. The union, which consists of the Single Supervisory Mechanism and the Single Resolution Mechanism, is primarily intended for euro currency area countries. Non-euro area countries, such as the Czech Republic, have the opportunity to join the banking union by concluding so-called close cooperation with the European Central Bank. From the non-euro area sphere, Croatia and Bulgaria have joined the banking union as they are on the way to adopt the euro currency.

The conclusions of the updated Czech document are thus identical to those of the study from 2015. “It is recommended to prepare another update after the Czech Republic’s presidency of the EU Council,” states the paper, referring to the second half of 2022, when the Czech Republic will lead the EU. Alena Schillerová / Facebook Czech Minister of Finance Alena Schillerová. The study previously warned that if the Czech Republic would access the banking union, several competencies of the national crisis management authority, or the Czech National Bank, would be limited.

Countries such as the Czech Republic and other eastern countries have been loath to give up their currencies and adopt the euro. Poland, for example, credits the ability to devalue its currency with maintaining competitiveness for its export market and a degree of economic sovereignty. The original Czech study from 2015 also showed that the stability of the Czech financial sector was and is better than in many other EU member states. The updated document for 2021 repeats this conclusion. In the study, the Czech Ministry of Finance pointed out that although the update reflects the events of 2020, complete data on the situation in the banking sector of the Czech Republic and the other member states are only available until the end of 2019. The update also does not fully cover the effects of the pandemic crisis as many of them will not show in the data until the next period.