RPT-FACTBOX-Czechs look to map out new road to euro

 (Repeats story published late on Wednesday) 
    Oct 25 (Reuters) - The Czech Republic is left with no target 
date for euro adoption after the central European country's 
finance ministry and the central bank dropped the aim of joining 
the euro zone in 2010. 
    For a news report, double click on [ID:nL25734501]. 
    The following are the main recommendations and forecasts 
included in a euro convergence analysis prepared jointly by the 
finance ministry and the central bank for Wednesday's cabinet 
meeting and obtained by Reuters from a ministry source. 
     
 RECOMMENDATIONS: 
    - The Czech Republic should not to seek to enter the ERM-2 
mechanism in 2007; this means a delay in the euro entry target 
date beyond the earlier considered horizon of 2009 and 2010; 
    - A decision about the date of ERM-2 entry and, 
subsequently, on euro adoption must be taken only after 
sufficient progress has been made toward public finance and 
labour market reforms; 
    - There should be no increases in indirect taxes during 
membership in the ERM-2 to avoid the risk of breaking euro zone 
entry rules for price stability; 
    - It will probably be necessary to lower the central bank's 
inflation target to ensure that the euro zone inflation 
criterion is met with a "great degree of probability." 
 
 MEDIUM-TERM ECONOMIC FORECASTS 
                       Reference Value    2006  2007  2008  2009 
 Inflation (HICP)            3.0*          2.4   2.6   2.5   2.5 
 Govt deficit* (pct/GDP)     3.0           3.5   4.0   3.5   3.0 
 Govt debt (pct/GDP)        60.0          30.6  31.7  32.4  33.0 
 Long-term int. rates        6.4***        3.9   4.5   4.3   4.3 
 Currency (ERM-2 membership)  -****        no plan to join yet 
 
    NOTE. * Based on the 2008 and 2009 forecast for 12-month 
sliding Harmonised Index of Consumer Prices (HICP) average for 
the three best performing EU members on price stability. 
    ** General government balance, as measured under the 
EU-harmonised ESA 95 methodology = central state budget, local 
budgets, healthcare insurers and various agencies and funds. 
    *** Based on the 12-month average for secondary market 
10-year government bond yields forecast for 2008 and 2009 for 
the three best performing EU members on price stability. 
    **** Czechs have a freely-floating currency. 
    Exchange Rate Mechanism (ERM-2) is the mandatory 
stability-testing currency regime where euro hopefuls must spend 
at least two years prior to joining the single currency zone. 
 
 ((Compiled by Marek Petrus; Reuters Messaging: 
rm://marek.petrus.reuters.com@reuters.net; e-mail: 
prague.newsroom@reuters.com or marek.petrus@reuters.com; Tel: 
+420 224 190 477; editing by David Christian-Edwards)) 
  Keywords: ECONOMY CZECH EURO