Us Czechs, we tend to marginalize the common history with Austria and hide it somewhere in our subconscious. The most that we are willing to do is tolerate their presence in our history books. And we do this despite the fact that the Austrian and Austro-Hungarian history is decisive for us in so many ways that we tend to dismiss it – not because of its insignificance but rather because it is so self-evident. One of the most obvious realms where this is true is finance, currency matters and central banking.
At this point let us remember an impressive anniversary. The Austrian central bank celebrates 200 years of uninterrupted operation. In 1816, Francis II established “Die privilegierte oesterreichische National-Bank” (OeNB) five years after the Austrian sovereign default that resulted from the Napoleonic wars. We can therefore congratulate the Austrians because our central bank only turns 23 this year. At least it formally does.
History often wants us to believe that at certain turning points all that was bad is erased and the good is being built from zero. In reality however, even after the most fundamental and revolutionary changes, we can still see a lot of continuity and smooth transitions in between historical periods. The history of individual institutions, their employees, buildings or agendas naturally evolve in a gradual manner, without twists and turns.
Czech central banking underwent exactly this evolution. Formally, it was established only after the dissolution of Czechoslovakia, but it was hardly from scratch. The division of the State Bank of Czechoslovakia was a well thought out process. It was established in 1950 though the transformation of the National Czechoslovak Bank (NBČS) that, in turn, followed on the Bank Bureau of the Ministry of Finance. The bureau was the first financial authority of a young Czechoslovakia and, founded in 1918, its task was the oversight of monetary emission that was to be separated from the “German” Austrian one.
There was significant tension between the two monetary authorities – the Bank Bureau in Prague and the OeNB in Vienna – in regards to how to move forward after World War I. Prague wanted a radical reduction of the money supply that resulted in a strong long-term deflation, which was unheard of in Central Europe. Vienna, on the other hand, let the money emission become much less restricted, with high inflation as a result. Despite these differences, the Bank Bureau did, to a large extent, build on the infrastructure developed by the OeNB during the 19th century.
The first act of the OeNB in 1818 was the establishment of a currency exchange (Bank_Filial-Casse) in Prague. Thirty years after that, an OeNB branch was established in Prague to engage in discount trade (Filial-Escompte-Anstalt). It was the first of its kind in the whole monarchy, with Budapest being the second branch in 1851 and Linz one year later. Another proof of the importance of Bohemia for the OeNB is that out of the first branches the OeNB established, four were in Bohemia (Prague, Brno, Olomouc, and Opava) and by 1918, the number went up to 25 out of a total of 104. That share is much higher than the share of the Czech population in the monarchy. This branch system was taken over by the Bank Bureau of the newly emerged Czechoslovakia and was not changed one bit in the post-war years.
Regardless of the different opinions on monetary policy after World War I, the Bank Bureau publicly announced in March 1919 that it will continue to build on the heritage of the OeNB. It even adopted its work, disciplinary code, and the company rules (Dienstunterricht). Over 60% of the 356 employees were recruited from the ranks of former OeNB staff. We could add many other continuities to the list, which leads us to the conclusion that the Czech National Bank can be regarded as an indirect successor and maybe ever heir of the traditions of Austrian central banking.
There is no doubt that the monetary history of Austria-Hungary is a part of our daily lives. Czechoslovak and Czech monetary history reveals ties to the monarchy with one very important feature: the currency. We still use the crown in Czech Republic which was established after a monetary reform in 1892 by Franz Joseph I. With this reform the old currency (zlatky and krejcary) was renounced. The exchange rate between the new and old currency was 1:2 which has implications. Even for today’s language, a “pětka” (fiver) is the name for the 10 crown coin. Czech Republic is the last country of the former Austro-Hungarian Empire that still uses the crown – despite various regime changes and the republican tradition of Czechoslovakia.