Czech PM says must move cautiously on euro entry

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The Czech government will go slow on euro adoption to make sure the economy is well prepared for the common currency and that people benefit, Prime Minister Mirek Topolanek said on Tuesday.

Speaking at a business conference in Prague, Topolanek reiterated his government's cautious stance toward euro entry.

"We want to be prepared well and make a totally serious political decision which must mean that it will be a beneficial step for Czech citizens and Czech companies," he told a business conference.

Topolanek said Czechs had higher trust in their crown than some countries that had adopted the euro enthusiastically, and needed to be convinced to swap it for a new unit.

"Czechs like the crown, Czechs trust the crown, they save in it, and have quite a rational fear from a devaluation of savings because they have gone through it before," he said.

"I cannot see (us) steamrolling the Czech public by decreeing the euro, because it is not like Slovenia where they sacrificed their currency without tears," he added.

Topolanek, leader of a centre-right government, said the EU member country would not enter the pre-euro ERM-2 exchange rate band next year, and thus 2012 seemed an unlikely entry date, echoing earlier comments that he is in no hurry to adopt the euro.

Czech business groups have called for quick euro adoption, seeking to stem a squeeze on their export margins coming from the long-term strengthening of the crown.

But Topolanek said businesses, especially smaller ones, should not rush for the single currency.

He said that the firming crown helped keep a lid on prices of imported energy and other costs, and its fixing may cause trouble for businesses on the input side.

DIFFERENT POLICY NEEDED

Fast-growing economies need different monetary policy than the euro zone, Topolanek said.

"No one has the feeling here, quite justified, that the ECB would want the Estonians, Czechs and other countries to co-decide on European monetary policy," he said.

"Monetary policy of fast-growing economies is different from monetary policy of countries that have growth around one percent," he said.

A number of ECB and European Commission officials have called on euro entry applicants to make sure their economies are well prepared for the common monetary policy.

European Central Bank Executive Board member Lorenzo Bini Smaghi said earlier on Tuesday that euro zone interest rates may be too low for some fast-growing new entrants catching up with the richer west European countries.

Topolanek said he wanted to stabilise the country's budgets by the time of euro entry to ensure that for at least a decade ahead the country would significantly outperform the so-called Maastricht convergence criteria.

He said his aim was to reach a balanced budget in 2014. (Reporting by Jan Lopatka; editing by Alan Crosby and Tony Austin)

Keywords: CZECH EURO/

[PRAGUE/Reuters/Finance.cz]