Czech Koruna: Political tensions drive up risk premium – Commerzbank

The Czech koruna could face a higher political risk premium over time. Commerzbank’s Tatha Ghose warns that Czech government plans for public media funding risk intensifying political tensions. The near-term FX effect is expected to be limited, with recent CZK weakness attributed to EUR/USD. However, prolonged protests and institutional clashes could increase domestic political risk over the coming quarters.

Koruna Risk Premium: Public Media Funding Dispute

"The Czech government’s attempt to abolish television and radio licence fees is turning a proposed financing reform into a broader confrontation over freedom of media and the democratic process."

"The government proposes ending the current CZK 205 monthly household fee for radio and TV licences, to be replaced by direct budget funding. At the same time, the budget of the public broadcasters is proposed to be cut by 15% beginning 2027. The government wants to sell the idea as a way to lower costs, improve accountability and preserve editorial independence through statutory guarantees."

"Further demonstrations and a strike by public broadcasting employees are planned for November, suggesting that the issue will, at minimum, remain a source of political tension rather than simply fade away from public consciousness."

"The political handling in the Czech Republic may prove damaging too: the ruling coalition’s use of an emergency procedure and a highly unusual early-morning vote reinforces accusations that it is bypassing normal democratic scrutiny. Thousands protested in Prague after the ruling coalition pushed the bill through its first reading in an extraordinary overnight session (on 24 October), with little prior warning and sharply curtailed debate."

"For the Czech koruna, the immediate effect will be modest, and in the longer-term any residual impact on political risk premium will depend on how much of a free pass Babis gets in following through with this idea. The koruna has depreciated in recent days already, but that probably reflects the accelerating decline in EUR/USD itself (which reached a low since mid-2025). That said, sustained protests, institutional confrontation and doubts about media independence could add a layer of domestic political risk-premium in coming quarters."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)