The government says it is likely to delay introducing the euro until after its expected launch in 2010, an announcement that comes as a disappointment to many businesses already anticipating the single currency's potential for simplifying their dealings with foreign buyers.

Officials say 2012 or 2013 is a more realistic date.

It will take that long to reduce the country's deficit, stabilize its interest rates and reign in inflation — the Maastricht Criteria set by the European Union for member states that want to adopt the single European currency and be part of the euro zone.

"This is bad news," says Jiří Zeman, who owns Limtek, a producer of laser and measurement technology based in Blansko, south Moravia. "We export and are currently losing money due to the strong crown. We are very unhappy with the current situation with the government."

Up to 85 percent of Czech exports go to EU countries.

The daily Hospodářské noviny recently polled 45 leading domestic companies, half of which said they wanted to get the euro as soon as possible.

But these are unsure fiscal times for many of the new EU member states.

Hungary, Poland and Slovakia are also considering delaying euro adoption.

Deputy Finance Minister Eduard Janota said on a popular political talk show Aug. 20 that 2007 would see a projected budget deficit of 88 billion Kč ($4 billion), 3.8 percent of the country's gross domestic product (GDP). The Maastricht criterion allows deficits of no more than 3.3 percent of GDP.

But Vlastimil Tlustý, candidate for the finance minister post under the new government led by the Civic Democratic Party (ODS), says next year's budget deficit could be even higher: as much as 100 billion Kč.

Some economists put the figure as high at 150 billion Kč.

In order to trim the budget, the government has to make unpopular cuts to social spending, something it is reluctant to do.

Outgoing Prime Minister Jiří Paroubek, for example, told the Czech News Agency that euro adoption should be postponed if it requires deep cuts in social spending. That could include freezing pensions and parental allowances and slashing wages for civil servants.

According to economists, the country would benefit from joining the euro zone but only if it joins at a point when the economy is ready for adoption.

"The economy would suffer much more if the government adopted the euro at the wrong moment, before the country meets the economic requirements," said Evžen Kočenda, an economy professor at Charles University.

Financial discipline

Economists say that joining the euro zone would improve the government's fiscal discipline.

By adopting the currency, the government will have to give up two important ways it influences the economy: currency fluctuations and interest rates.

To cope with various economic shocks without these tools, an economy must be flexible enough to deal with them in different ways.

After joining the euro zone, for example, the government should be able to react to a drop in export demand by increasing the budget deficit. When the economy is growing, the budget should show a surplus.

But Pavel Sobíšek, chief economist for HVB bank, says, "The current budget deficit is so high that a further increase is out of the question."

If an economy is not flexible enough, adoption of the euro may come as a shock.

This happened in Italy, which had a tradition of dealing with economic problems by increasing inflation and now finds itself struggling.

Up to now, the Czech government has neutralized various economic shocks coming from the outside by strengthening or weakening the crown.

Not alone

The country's likely inability to adopt the euro by 2010 would not hurt the economy too much because other countries in the region are also dragging their feet.

"We will not be an isolated island in the region," said Petr Sklenář, an analyst with Atlantik finanční trhy brokerage house.

Hungary, which originally planned to adopt the euro in 2010, is now pushing its deadline to between 2011 and 2013, also due to a high budget deficit. Poland and Slovakia are also likely to stretch the deadline beyond 2010.