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ERM II stirs up Prague’s quiet man

Sitting over lunch within view of Prague’s landmark Charles Bridge, Zdenek Tuma, the 44-year old Czech central bank governor, uncharacteristically lets rip.“Two years is a nonsense, yes a nonsense!” he exclaims, speaking about the need for the Czech koruna to join the Exchange Rate Mechanism II (ERM II) for 24 months in order to ultimately join the euro. He is not alone in his dislike of this condition of entry. Many other accession country central bank governors share his views.
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It is just not something that makes newspaper headlines. And it was the only time during the interview that the usually controlled Mr Tuma showed any emotion.

“Part of the explanation is the world today is quite different in terms of monetary policy from [when the] ERM [was invented]. Monetary policy was based primarily on exchange rates – pre-euro currencies were implicitly pegged to the deutschmark,’’ says the thin-lipped governor.

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