The new kid on the rails is already looking further afield; Česká spořitelna sues to cancel Sazka tender, unsuccessfully; the government approves ambitious competitiveness strategy for 2012 to 2020; foreign debt rises by 32.2 billion; 15 years of GDP revised to account for drugs, prostitution.
The new kid on the rails, RegioJet, has only been up and running since Monday, but already it’s confirmed its interest in expanding. At present the sole rival to state-run Czech Railways is competing only on the Prague-Ostrava line; as of Friday the Student Agency subsidiary has upped its ante to take over the running of half of the long-distance EuroCity and InterCity trains on the Prague-Brno-Břeclav line. Student Agency wrote the Ministry of Transportation on Thursday that it would like to operate the service from December of 2012 and will not by looking for state subsidies. Later the company envisions operating all EuroCity and InterCity trains as well as express trains in the country, adding that it would save the state hundreds of millions of crowns a year.
Sazka, the bankrupt lottery giant, was sold by tender this week to two financial groups, PPF and KKCG, the former owned by world’s-richest-Czech Petr Kellner. Not by any means was everyone happy about the agreement, with some creditors calling the tender method downright illegal. The Penta group, which boycotted the tender claiming it was illegal, offered five billion for Sazka outside of the competition and wants to contest the decision in court. According to the bankruptcy register, the bank Česká spořitelna in fact did sue for the tender to be cancelled, arguing that the contract between PPF and KKCG and the creditors’ board would not be valid as the creditors should not vote on their own affairs, and PPF and KKCG are both creditors. The Municipal Court of Prague tossed out that idea, and subsequently blessed the new marriage with the financiers. PPF and KKCG offered the highest bid for Sazka, at 3.81 billion crowns.
The government approved its strategy for competitiveness in the years 2012 to 2020 this week, which was prepared by the Ministry of Industry. The strategy aspires to put the Czech Republic among the twenty most competitive countries of the world in that time. That aim comes after a slump that set the Czech position five slots back on the list of the World Economic Forum to 36th place. The plan relies on no less than 43 projects covering more than 200 specific measures to be taken, based on the recommendations of multinational institutions and the government’s National Economic Council. Among the main pillars of the strategy are improving the effectiveness of institutions, high-quality infrastructure and an innovation-driven economy. Trade unions and employers have approved the plan.
The Czech National Bank announced this week that the country’s foreign debt had increased by 32.2 billion crowns in the second quarter of 2011 to nearly 1.8 trillion, i.e. 48.1% of gross domestic product. Year-on-year, that marks an increase in foreign debt of 65.7 billion that was seen across the board in all sectors of the economy, but most in the corporate sector. Foreign liabilities with maturities of longer than one year accounted for 72.8 percent of the total foreign debt in Q2, which analysts say means the debt structure remains favourable. Growth in external debt was particularly apparent in banking liabilities, the central bank said, with that sector accounting for 25.4 percent of the total debt.
The Czech economy grew faster last year than previously estimated. A revision of the national accounts carried out by the Czech Statistical Office shows growth of 2.7 as opposed to the previously announced 2.3%. The revision goes all the way back to GDP data for 1995 and is the largest to take place since that time. Part of the reason for the alterations and the sometimes large modifications is the transition to new economic classifiers issued by the European Commission, which call for the calculation of “grey market” sectors, namely prostitution, smuggling and narcotics. Until now, the statistics office had only included estimates from prostitution and tobacco smuggling. The share of those, grey, factors in the GDP jumped from 5.8% to 7.3% after the revision. The next extra-ordinary revision will be in 2014.