Czech Koruna: Why political tensions are pushing up the risk premium – Commerzbank

The Czech koruna faces only a modest immediate FX impact from the dispute over public media funding, but Commerzbank’s Tatha Ghose argues that the government’s moves risk intensifying political tensions and raising the currency’s risk premium over time. Recent CZK weakness is attributed to EUR/USD movements, while persistent protests and confrontation between institutions could increase domestic political risk in the coming quarters.

Could the media dispute raise the Koruna risk premium?

"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. Learn more.)