The Czech National Bank governor Zdenek Tuma has called on the government to step up its efforts in cutting the country's growing debt to avoid future crisis. Tuma pointed out that the central bank has long and very consistently been saying that given the structure of the budget, the growing indebtedness is not sustainable in the long term and that government measures have proved insufficient. He added though that the situation was not critical in the sense of a danger of a collapse of the economy or a steep fall of the exchange rate. Mr. Tuma sees major tasks ahead in system changes in the pension and health care systems.
The government has postponed a final decision concerning a bill on property declarations again. The law, which divides the government coalition parties, is seen as a key tool in government's campaign to curb the shadow economy.
The draft law would allow revenue offices to check the origin of individual property. Those who would be unable to prove they funded their property with legal, taxed incomes, would pay a penalty amounting to 70 percent of the value of the property.
The bill, aimed at fighting tax evasions and money laundering, has caused controversy within the ruling coalition. The two smaller coalition parties were originally against any form of property declarations. The three parties eventually agreed on the bill but some ministers for the senior government Social Democrats have been trying to make the law stricter and retroactive, which is unacceptable for the other two parties.
The Czech Finance Minister Bohuslav Sobotka expects the Czech budget deficit to drop to just below six percent of GDP this year from last year's nearly 13 percent.
The European Union's statistics office Eurostat put last year's Czech deficit in double digits, about twice what Prague had reported, due to the inclusion of various debt guarantees which could, potentially, weigh on the budget. The Czech government described this as a one-off step which would not carry on in the coming years, and therefore does not alter the picture of Czech public budgets as a whole.
The Czech government needs to cut the fiscal gap below three percent of GDP to qualify for adopting the euro at the end of the decade.
The Prague Stock Exchange will most likely see the first IPO since its establishment in 1990 this or next year. The Czech computer firm AAC is planning to raise around 300 million crowns (or 11 million USD) on the Prague Stock Exchange for domestic and regional expansion. The firm said it had selected the country's top brokerage house Wood&Company as its financial adviser.
AAC, which controls 17 percent of the Czech personal computer market, said it would use the funds for domestic acquisitions and expansion to Poland, and countries in the Baltic and Balkan regions.
A government commission has recommended 25 projects for the post-war reconstruction of Iraq. The Industry and Trade Ministry said the government has allocated almost 7.5 million USD for subsidies to Iraq reconstruction projects. The cabinet should decide on specific projects next Wednesday.
The selected projects focus on key sectors such as oil extraction and processing, energy production, construction and water management. The government allotted another 3 million USD for other projects, such as training of Iraqi police as well as security and diplomatic purposes.
The Czech National Bank has reported an increased number of counterfeit US dollars in the Czech Republic. The number of intercepted counterfeit US banknotes reached nearly 200 in the first quarter, which was almost 25 percent more than in the same period a year ago. The Czech currency is also popular among forgers with the vast majority of nearly 3,200 counterfeit banknotes reported being Czech crowns. Most frequently forged Czech banknotes are 500 and 1,000-crown bills.
The number of the self-employed has been falling in the first three months of this year, and dropped by 31,000 to 968,000 in the period. Representatives of sole entrepreneurs say the decline may be due to the new tax legislation in force as of January.
According to a new law, even those self-employed people who end in the red have to pay a minimum tax equal to the tax paid by an employee earning half the average wage. Mandatory social and health insurance payments have also been raised.
The president of the Economic Chamber Jaromir Drabek believes that the fall in the number of the self-employed has been caused by the first stage of the public finance reforms pursued by the government.
The number of the self-employed in the Czech Republic is relatively high in comparison with other EU member states. Only EU countries like Greece, Portugal, Italy, Spain and Ireland have a higher percentage of the self-employed in the total number of economically active people.
On Wednesday, hundreds of thousands of civil servants staged a one-hour strike in protest at a planned reduction of their special end-year bonus, the so-called 13th-month salary. Later that day, the Finance Ministry announced the government was planning to lay off nearly 9,000 civil servants this year, reducing their number by 2 percent. The plan is to make redundant 6 percent of the workforce in the civil sector by 2006, which is some 30 thousand people. The staff reduction is part of the government's public finance reform.
The Czech national railway carrier Ceske drahy may lay off some 14 thousand staff or 20 percent of the workforce next year, according to a strategic development plan of the company. CEO Petr Kousal said most of the people will be transferred to newly set-up subsidiaries.
This year, Ceske Drahy are planning to make 6000 redundant. The Trade Unions have rejected such extensive lay-offs and threatened to go on strike. The Transport Ministry noted that it was the Trade Unions who pushed through a 5-percent wage growth for this year, which is much more than the company can afford unless it slips into yet bigger losses.
Ceske drahy plans to create a holding company. In the first stage, it wants to transfer supporting activities into subsidiaries, such as Research and Development, telecommunications, forwarding and logistics. In the second stage, subsidiaries will be set up to take care of the main activities.
Czech building societies have reported a steep decline in new contracts in the first quarter after a record volume of new business last year. Interest in home-building savings has decreased by almost 60 percent mainly due to a reduction of state subsidies.
By contrast, the volume of loans provided by building societies has been growing. One of the largest Czech building societies, Ceskomoravska stavebni sporitelna, said the volume of loans grew by more than 50 percent in the first quarter.
The government slashed subsidies on home-building savings as part of its fiscal reform as of January this year. Building societies concluded more than 2 million new contracts in 2003 as people wanted to take advantage of the old, more favourable terms.
Czech breweries have reported record high exports in 2003. The 48 Czech breweries exported over 2 million hectolitres of beer, which is an 8-percent increase year-on-year.
Exports account for more than 11 percent of total beer production in the Czech Republic. The biggest buyer of Czech beer was Germany, absorbing 38 percent of the Czech beer exports, followed by Slovakia, and the UK with 16 and 10 percent, respectively.
The most successful exporters were Pilsner Urquell with 30 percent of the total exports, Budweiser Budvar with about 25 percent, and Staropramen with some 20 percent.
Beer output in the Czech Republic increased by 3 percent last year to more than 18 million hectolitres. On average, Czechs consumed 160 litres of beer per capita per year.
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