25-10-2001

2002 state budget proposal rejected in its first reading

Last week the Lower House of Parliament rejected the government's state budget proposal for 2002. The main objections to the proposed budget were unrealistic revenue expectations and excessive deficit. The rejected budget proposal outlined a deficit of 52 billion Czech crowns, with 700 million crowns in revenues and 752 billion crowns in expenditures. The House asked the government to present a new proposal within twenty days and approved a set of recommendations for the government to observe when drafting the new version of the state budget. In his first reaction to the vote, the Prime Minister Milos Zeman described the recommendations as reasonable and said they would be taken into account. According to the latest reports, the government has already presented a new version of the state budget to the opposition for preliminary consultations.

Deputy PM warns against provisional budget

The Deputy Prime Minister, and the leader of the ruling Social Democratic Party, Vladimir Spidla, has warned against a second rejection of the state budget by the Parliament. He said such a step, which would lead to the introduction of a provisional budget, could seriously endanger the Czech Republic's security in a situation when the country has joined the fight against global terrorism.

Trade balance in surplus

For the first time in two years, Czech foreign trade has shown a surplus in monthly terms. The Czech Statistics Office announced that in September, the Czech foreign trade showed a surplus of 20 million USD, as compared to a 100-million deficit in the same period of 2000. The Czech crown reacted to the news by strengthening to another record level of 33.39 crowns to the euro. However, according to economic analysts, the September figures testify to a decline in imports rather than the success of Czech exporters. Analysts had expected a deficit of more than 200 million dollars in September. For the first nine months of this year, the foreign trade gap widened by around 230 million dollars to 2.3 billion year-on-year.

Electricity and gas prices to grow

Energy prices in the Czech Republic have been subject to administrative regulation for the past 11 years. On average, a Czech family currently spends around ten percent of its income on gas and electricity. As of January 1, 2002, prices of electricity are to grow by up to 16 percent and prices of gas by 5 percent.

Economic analyst Radomir Jac from the Prague office of Commerzbank believes that the impact of the energy price deregulation will not be too harsh for Czech households:

A complete lifting of price regulations is a prerequisite for the liberalisation of the energy market. However, unlike in other countries, it is not expected to bring about lower prices for households. The chairwoman of the independent Energy Regulation Office, Jana Novotna, explained recently that the economics of Czech energy firms were different from neighbouring Germany, where prices decreased significantly after the market was opened to competition. The main problem is the depreciation procedure which is not sufficient for renewal of machinery and forces companies to generate higher profits for this purpose.

The Energy Regulation Office says, however, that it is possible to expect a wider gap between prices in the peak and off-peak hours. The liberalisation of the Czech energy market will take place in several steps, starting in 2002, when only the largest customers will be able to select their suppliers of electricity. Households and smaller clients will be the last to have the choice - in 2006.

New law on advertising discussed by parliament

The Lower House of Czech parliament has approved in its first reading a government draft on the regulation of advertising. It introduces restrictions for advertising of tobacco, alcohol, and pharmaceutical products as well as weapons and some other products. Some of the opposition parties have accused the government of yielding to pressure from tobacco producers and that in reality the government does not want to fight smoking.

EU recommendation on cigarettes

On a related note, the European Commission has recommended to EU member states that they grant a delay before forcing new member countries to impose the EU's very high consumer taxes on cigarettes. It has suggested a three-year transition period for the Czech Republic and Slovakia, and two years for Poland, Romania and Slovenia. The question as to whether tobacco should be included among the concessions given by the EU to candidate countries has been the subject of a long and heated debate within the Commission, and the recommendation comes as a compromise. The candidate countries themselves had wanted a longer transitional period. Opponents say the concessions will encourage the smuggling of cheap cigarettes from east to west.

Government to subsidise mortgages for young families

The government is to discuss yet another way to help young families obtain a decent home on the stalled housing market. Under the new proposal, the government's Housing Fund would subsidise mortgages taken by people under 30 years of age with up to 200,000 Czech crowns for the construction of a new family home or the purchase of an existing one.

The spokeswoman for Ceska Sporitelna Bank, one of the Czech Republic's largest banks, Klara Gajduskova, says most of the clients who take out mortgages are young and have just begun to live on their own. They usually take mortgages of less than one million CZK. However, to be able to take a mortgage of 1 million Czech crowns - just enough to buy a two-room apartment in Prague - the family must have a monthly income of 26,000 crowns after tax, which is almost triple the national average wage. This not a problem for middle-class families if both partners have jobs, but it is virtually impossible for a family with babies and the mother on the maternity leave. The new government proposal though might help even them:

25-10-2001