Unnecessary fear of the eurozone

What are we afraid of if we do not provide a loan of 90 billion to the International Monetary Fund to help the eurozone? Fear of the eurozone and the IMF is unfounded.


Our government is currently discussing a possible loan to the International Monetary Fund to help indebted eurozone countries. This is about 90 billion crowns, which we would send from the CNB's foreign exchange reserves.

If we do not provide this money - say the proponents of the loan - then we isolate ourselves from the world, the IMF or the EU (Germany and France) will take revenge on us and when we need help ourselves, everyone will cough on us.

The EU cannot do anything to us

To say that the EU or eurozone countries will take revenge on us is a statement made without knowledge of basic economic laws.

For example, in Slovakia, Chancellor Merkel was a popular scarecrow "Would call" German investors and agreed "By" with them their departure from the land. This idea is of course absurd.

As a result, it is not states that trade, but private individuals and companies. It does not trade Germany with the Czech Republic, but Volkswagen with the Škoda, certain people with certain people. They have their own interests and it is not their task to follow the "interests of the state". It's about their own money and business.

Customs will not hurt us

Even if there were a rather extreme situation today - a kind of period of trade war, when the eurozone countries would introduce retaliatory duties or import quotas on imports from the Czech Republic for our negative attitude - we have nothing to worry about.

Of course, many exporters might lose their current markets. The situation would change, but it would be enough to reorient to other markets.

And honestly, there are already much more lucrative markets in the world todaythan euro area markets. Reorienting to Asia, the USA or Russia could bring us much more benefits and security in the future than the association of mutually borrowing chronic debtors, in which a group of countries paying euro.

On the other hand, for companies in Germany or France, customs duties on Czech imports mean a necessity buy real more expensive productsthan what they could take so far. As a result, he will feel it, of course consumer, which can be the German, French or Spanish. Surely we all agree that artificially increase costs in uncertain times of crisis not exactly far-sighted.

For us, a possible duty only means pressure to reorient our exporters, which is only relatively short-term problem. For the euro area, however, this means insuring another economic downturn accompanied by classic clichés of protectionism, namely in the long run.

We will lose subsidies!

… I would just add: thank God!

Of course, subsidies from Eurofunds are not free. Everything that is subsidized by the EU the Czech Republic must co-finance with its own money. Given how important and useful projects the EU finances, we often find our own resources drowning in black holes for money.

However, the initial funding itself does not end there. Every project has its own other operating costs to be paid.

Finally, subsidies distort the market and have the potential for corruption.

Is it worth it to us?

When we need to, they won't help us!

Here you just need to answer two questions: would their help be beneficial and would those institutions benefit from anything?

As he says, for example Markéta Šichtařová: that IMF Decades of bankruptcy do not mean that this cannot happen now. The IMF is not a central bank, money does not print. When debtors have nothing to repay him, he has nothing to repay the money from.

However, this does not change the fact that similar "assistance" in the form of debt transfer from one institution to another only creates moral hazard environment. After all, bankruptcy with a debt in the order of trillions of crowns is much more "pleasant" than bankruptcy with a debt in the order of tens or hundreds of trillion crowns.

The effect of "help" is nothing but allowing much more debt and once so bankrupt with a lot worse looking account. The result will only be cuts and changes that will be much worse for each of us than if we did not artificially prolong the agony of debt.

We have nothing to fear

Fear of the eurozone and the IMF is unfounded. We need to realize that indebted countries now need us much more than we do. They have nothing to threaten us at a time when they are running out of money, even for their own normal operation. It's like being afraid of being slapped by a paralyzed person.

PS: The IMF should contribute EUR 200 billion to eurozone countries. However, in the first months of next year alone, bonds of euro area countries maturing in the amount of € 1,1 trillion (over 25 trillion crowns), half of which are bonds of Italy, Spain and France. Does anyone really believe that IMF action would help?


  1. I am a frequent critic, but in this case, the EU would be even more radical.

    No one has yet succeeded in lending itself to a good result, and I doubt that it will succeed in the EU.
    The sooner we cut off this gradual death of the EU, the better. We will certainly have difficulties at the horizon of the year, we can only get from the horizon of years on that merciful death.

  2. By the way, the fact that today, on the basis of some treaties, it is not theoretically possible for certain situations to occur does not mean anything anymore. As we can see in recent months: the EU, its institutions and its Member States are experts in not following their own agreed rules.

  3. @Jan Ráž - I didn't quite start it. I just came across various reactions like "if we don't help the eurozone, the eurozone will take revenge on us, because investors will leave / tariffs will be introduced / subsidies will be abolished / they won't like us…"

    I just wanted to refute these theses - even if these scenarios occurred, it would not harm us in the long run. Customs and import quotas always impoverish, especially the country that imposes them.

    "The EU, as a treaty of sovereign states, is primarily based on the principle of free movement of goods and services."

    To understand - the free movement of goods and services is ensured under treaties other than political union (EU). For us, withdrawal from the EU does not mean the expiry of the treaties on the free movement of persons, goods, services, capital…

    "Customs protection can only concern the external protection of the pan-European market, and therefore the state of the euro area does not have a fundamental effect on trade between member countries."

    The EU is one of the most protective associations. It is not about free trade, but about pure mercantilism on a continental level. Internationally, the EU is not seen as a proponent of free trade, but as a protectionist.

    And they do not have a direct effect on trade between Member States, but they have an indirect effect. If I introduce tariffs on Chinese paper imports (centrally, 'continental'), it will certainly affect trade between Member States and their economic level: http://devian.cz/2011/cino-diky-za-tvuj-papir/

  4. I don't know why you're mixing any tariffs in the IMF loan debate. The EU is not just an enurozone, and the fear that the whole of the EU will fall apart in connection with the collapse of the eurozone is really just the fear of politicians who cannot honestly end a project that failed. The EU, as a treaty community of sovereign states, is primarily based on the principle of free movement of goods and services. Customs protection can only concern the external protection of the pan-European market, and thus the state of the euro area does not have a fundamental effect on trade between member countries. I emphasize the "principled" of course, it will have an effect on the trade itself, because what transferable coefficient will be used to take into account payments for goods and services after the collapse of the eurozone is in the stars. But that's not the duty!

  5. So let them close. If they are not complete idiots, they will either sell them (ie companies will continue to operate) or they will be afraid to impose tariffs on the EU (for example, the German owners).

  6. Rather, it would probably be more accurate that our deposit should be comparable to our current position in the EU. .

    And as for our outlook without the EU - I would be more skeptical here. It would be nice if our entrepreneurs, as it is written, found new markets somewhere else in the world ... If - if those Czech companies belonged to Czech entrepreneurs. But we have sold out most of them a long time ago - including our banks and telecommunications to EU entities. And you can do whatever you want with them, you need to close them

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