According to the results of the International Comparison Project, based on
exchange rates and prices recorded in 1996, prices in the Czech Republic (C
R) were markedly lower than prices charged for many comparable products and
services in the European Union. This observation led some commentators to
conclude that there is price tension between the two economies and that the
CR's entry into the EU will cause a price shock in the CR unless every eff
ort is made to raise the CR's comparative price level in advance. This line
of thinking wrongly assumes that the CR's entry into the EU will necessari
ly equalize Czech and EU prices. The article, focusing on a comparison with
Germany, lists several reasons why such a shock is not a certainty and als
o cites some of the more important price pressures that are likely to influ
ence Czech price level during the country's accession to the EU.