Prague Castle

Tyler Cowen is looking into the dissolution of monetary unions. One recent case is the 1993 “Velvet Divorce” of the Czech and Slovak Republics. The basic mechanics of the switch. The countries had divided back in January, but maintained a single currency for a little bit, though the Czechs insisted on splitting up since they thought the Slovak economy would be weaker:

The current bank notes will be exchanged for stamped ones in the ration 1:1 since Thursday 4 till Sunday, February 7 at all post offices and detached sections of the Czech Savings Bank. During those days the banks will stop withdrawal from accounts and deposit books. Till Sunday only not-stamped bank notes are valid in the Czech Republic.

Stamped notes with the value of 100, 500, and 1000 crowns together with not stamped notes of lower value (10,20,50 and coins) will be valid since Monday, February 8. On the same day the Czech currency will be enriched by the first Czech 200 crown bill with the portrait of J.A.Komensky.

Every citizen aged 15 and more can exchange money to the value of 4000 crown, a person below 15 can exchange maximum 1000 crowns. The exchange will be certified in the identity card.

Persons who will not be able for serious reasons exchange money can do so within the following 6 months. If someone has at home more than 4000 crowns, he can deposit it in the Savings Bank of send through post to his own addresse where it will be delivered already stamped.

The situation in Slovakia was basically the same. Anticipation that the Czech Koruna would appreciate relative to the Slovak one meant “thousands of Slovaks rushed across the Czech border to have their old notes stamped as Czech.” Key to making this work is that at the time I believe the České Spořitelna bank was still a state-owned monopoly so capital controls could be applied in a straightforward and effective matter with ease.

The last real chance for Euroskeptics to defeat the Lisbon Treaty would be for Czech President Vaclav Klaus to refuse to sign the thing. In theory, a lone holdout can sink the treaty. In practice, the Czech Republic can’t hold off all the pressure from the rest of Europe. But all the Czechs would really need to do is delay signing the thing until the UK’s general election, at which point David Cameron’s Conservative Party will almost certainly come in. The Tories have promised to hold a referendum on Lisbon; but only if it hasn’t been ratified by all 27 EU members already. Now, though, it looks like the Czechs are going to give in to pressure to move quickly and head the Tories off at the pass:

The Czech PM, Jan Fischer, has told EU leaders he fully expects his country to ratify the EU’s Lisbon Treaty by the end of this year. [...] The Czech Republic’s Europe Minister, Stefan Fule, told the BBC he thought the Czech ratification could come in “weeks rather than months”.

Good news, I would say.