Planned euro adoption may still be three and half years away, but the Czech National Bank (CNB) is taking its first step to prepare for the transition by removing 50 Kc ($2.23) bank notes from circulation and replacing them with coins.

Though the coins were widely unpopular when they were unveiled more than a decade ago, the move will allow the CNB to reduce the significant costs of issuing bank notes — around 300 million Kc a year — that will soon be obsolete anyway.

"The approaching euro adoption makes it uneconomical to keep printing new bank notes, especially when we've got coins in stock," said Frantisek Vokaty´, director of the CNB's money-circulation department.

The CNB has dozens of millions of 50 Kc coins left over from the early 1990s, so, instead of issuing new notes, it's simply going to reduce its supply.

"We'll be able to make use of our past investments into minting the coins," Vokaty´ said.

'People never liked them'

The CNB introduced the 50 Kc coin in 1993. It won a few international design awards but never caught on with the public. People preferred bank notes because they were lighter and easier to differentiate from smaller coins. Banks also found them easier to deal with.

As a result of their unpopularity, the CNB withdrew most of the coins from circulation.

"The CNB minted dozens of millions of 50 Kc coins, but most of them actually never made it to circulation," said Evzen Sknouril, a currency expert. "People never liked them because they were easy to mix up with the 10 Kc coin."

Toward the end of 2005, only 5.2 million 50 Kc coins were in circulation, while there were 39.9 million 50 Kc bank notes. The CNB's decision to stop issuing new bank notes brought about a spike in the number of coins on the market.

By the end of April, there were 8 million 50 Kc coins in use and only 36 million bank notes.

Despite the unpopularity of the coins, the CNB has said it will only start reissuing the 50 Kc bank note if it runs out of its metallic counterpart.

A long way off

Though the CNB is preparing for euro adoption now to meet the planned 2010 launch date, it's still uncertain whether the Czech Republic will begin using the single European currency that soon.

Last August Prime Minister Jirí Paroubek and CNB Governor Zdenek Tu?ma agreed to begin using the euro in 2010, but since then many economic analysts and even CNB board members have said politics could push adoption back.

That's because the senior opposition Civic Democrats (ODS), who lead the polls with general elections a little under one month away, want to implement public finance reform, including overhauls of the deeply indebted healthcare and pension systems, before adopting the euro.

If the ODS does come out of the June elections in power and decides to make finance reform the party's top priority, euro adoption will have to wait until after 2010 because the reform process won't be quick, according to many observers.