Jaroslav Grusser usually takes his time before banking his paycheck, but this week he made a beeline for the teller window.
“It’s better to have money in the bank than at home,” Grusser said after depositing about $250 in his account at a Prague branch of the Czech Savings Bank. “When they divide the currency, there’s no telling what will happen.”
Since the partition of Czechoslovakia into two sovereign states on Jan. 1, Slovakia and the Czech Republic have maintained a tenuous monetary union, using the old Czechoslovak crown.
The union had been scheduled to last until midyear, but in recent weeks more and more signals have pointed to an early division of the currency. Like millions of other Czechs and Slovaks, Grusser is concerned that the impending split will at least bring serious hassles and could mean significant financial loss.
Hundreds of thousands of people have been lining up in both republics in a sort of reverse run on banks. Most people apparently believe that the bank is the safest place for their money until the currency splits.
Deposits for this month are running at about eight times the average for January, said Pavel Jirousek, a spokesman for the Czech Savings Bank, which holds about 90 percent of all consumer deposit accounts in the Czech Republic.
“In January, people normally deposit a lot of money,” Jirousek said. “But this year it’s totally unusual, probably because of fears of the money splitting.”
Officials won’t say when they plan to divide the crown for fear of causing a panic, but Josef Tosovsky, governor of the Czech National Bank-the country’s new central bank-has said it could happen within two to three weeks. Finance Ministry and central bank officials from both countries are scheduled to meet near Bratislava on Monday, and many observers believe that a decision could come at that gathering.
The Czechs have been preparing for the split since the first week of January, when the Czech National Bank began to mark Czechoslovak bank notes with a special stamp to distinguish them from Slovak currency. As of this week, the bank had some 23 billion crowns’ worth of stamped bills on hand, about 20 percent of the money supply and sufficient to meet demand for the first few days after a split, a spokesman said.
The stamping apparently caught the Slovaks off guard, but since the second week in January, the National Bank of Slovakia, the central bank in Bratislava, has been stamping its own notes by hand. To date, the Slovaks have only been able to mark about a quarter of the bills they will need. Meanwhile, both countries are trying to get new notes printed, although distribution may not be possible until the summer.
In the event of a split, any Czechoslovak crowns will have to be exchanged for the stamped banknotes-which will inevitably mean standing in long lines. So most people are trying to keep only enough cash on hand to meet their immediate needs.
“At home I’ve only got about 1,000 or 1,500 crowns ($30-$50),” printer Josef Vosatka said after making a deposit at his local bank branch in Prague. “I’ll keep most of my money in the bank.”
Any crowns acquired illegally may prove more difficult to exchange. Already banks in Austria and Germany-which trade in Czechoslovak crowns illegally exported from the countries-have stopped buying the currency for fear of holding large sums that will soon be worthless.
And the black market value of the crown has fallen by about 5 percent in recent weeks. The crown is only partially convertible, and Czechs and Slovaks are allowed to legally buy the equivalent of only about $270 in hard currency annually. Czech officials are discussing tighter controls at the borders to prevent any currency from entering the country illegally.
In Slovakia, concern is running even higher in the face of reports that the Slovak crown might be devalued. Anecdotal evidence points to a large flow of money from Slovakia into banks in the Czech Republic, though no one has specific figures to back that up.
“If I were making the decision, I would devalue the Slovak crown by about 35 percent,” said Vijay Khanna, country treasurer for Citibank in Prague. “The protection of the larger Czech economy is no longer available, and to be competitive in international markets the Slovaks need to devalue their currency.”
Many observers say the public pressure alone may be enough to force a split, but other factors indicate the division may be at hand as well. For example, hard currency reserves in both republics fell sharply in the first two weeks of the year, although they have begun to climb again. If either republic were to deplete its reserves, the currency union could not continue.
Already interest rates in the two countries have begun to diverge, and Czech and Slovak monetary policies will likely soon begin to grow apart as leaders of both nations pursue different goals-in the Czech lands tight-fisted anti-inflationary tactics, while in Slovakia looser policies aimed at boosting the flagging economy.
“You have two separate countries, two different political and economic agendas,” said John Connell, representative of Barclay’s Bank PLC in Prague. “In those circumstances it’s very difficult to keep a currency union.”
