Electricity prices are set to rise again in 2013, as the government seeks to recoup losses from huge subsidies paid out during the recent boom in solar power. Cheap solar panels imported from China and generous feed-in tariffs paid by the Czech government helped fuel a huge solar boom. Someone, however, has to pay for that boom and it seems like it will be the Czech consumer. From 2013 Czech households will be paying out an average of 2,200 crowns per year as their contribution to state subsidies for renewable energy – over ten times the 2009 amount.
This week in business: PepsiCo may sell its Central European division to Karlovy Vary Mineral Waters; electricity prices will rise next year, partially thanks to a new government proposal; the Czech Confederation of Industry publishes a bleak outlook for Czech businesses; a new computer system that would detect rigged public tenders is undergoing testing; RWE Transgas will not have to pay major fines to Russia’s Gazprom; the Czech potato harvest is down this season with uncertain consequences on consumer prices.
Meanwhile talks with the six Civic Democrat rebels who are holding out against the government proposed tax-hikes have failed to produce any tangible progress. The prime minister’s compromise proposal to raise only the lower VAT rate by one percentage point, from 14 to 15 percent, while the higher VAT rate of 20% would stay the same, has been rejected by the rebels, as has the concession that a so called “solidarity tax “- an additional 7% tax for individuals earning more than 100 thousand crowns a month would only be in effect next year. The rebel MPs want both of the tax hikes to be taken out of the bill completely. A vote on the controversial tax package has been postponed until next Wednesday giving the two sides more time and space to reach agreement. Any deal reached with the rebels will have to be approved by the Civic Democratic Party’s coalition partners TOP 09 and LIDEM.
The lower house of Czech Parliament returned the 2013 state budget bill to the government for reworking on Wednesday after the cabinet was unable to win support for a package of proposed tax hikes, forcing it to abandon the original draft proposal. Finance Minister Miroslav Kalousek said he would resubmit the bill within a month based on lower revenues of approximately 22 billion crowns with respective cuts in expenditures in the public sector. The finance minister has vowed to maintain the deficit in public spending under 3 percent of the GDP in 2013 at any cost. According to some sources the finance ministry plans to make fresh cuts in infrastructure and research spending. Analyst have warned against cutting expenditures to stimulate growth.
Czech Prime Minister Petr Nečas is facing arguably his biggest political hurdle since taking office: to convince rebel MPs from within his own party to toe the line on the government’s tax package or risk the future of the centre-right cabinet. But after talks on Tuesday saw no breakthrough, the prime minister and other members of his government scrambled for alternatives to avoid the government’s fall.
Finance Minister Miroslav Kalousek said shortly after the break-down of talks that the government would withdraw the proposed state budget for 2013 from the lower house and revise it. The finance minister said that in view of the deadlock within the Civic Democratic Party he would have to review the expenditures side of the budget and consider how the loss in revenues could be made up for by cuts in the public sector. He stressed that he was not prepared to increase the gap in public spending because of the tax dispute. A new draft budget should be ready within 30 days.
Czech banks tightened credit standards overall for corporate loans and loans for house purchase in Q3 2012, while leaving them unchanged for consumer loans, according to the Bank Lending Survey published by the Czech National Bank (ČNB) on Monday. The tightening of standards for both corporate and housing loans was due mainly to perceptions of risks relating to expected general economic activity and manifested itself during the approval of loans chiefly via a higher collateral requirement for corporate loans and a rise in margins, the national bank said. The demand for corporate loans and loans for house purchase declined. By contrast, demand for consumer loans increased, the central bank said. In Q4, banks expect credit standards to tighten for corporate loans and to ease for loans for house purchase. According to banks, demand for corporate loans should continue to fall. On the other hand, banks expect demand for loans to households to rise, the survey suggests.
Finance Minister Miroslav Kalousek has told journalists that if revenue
from the planned autumn issue of retail bonds topped 10 billion crowns,
issue would be a success. Investors will be able to order state bonds from
November 5 to November 30. The period, however, can be shortened by the
Finance Ministry. The ministry will also offer a premium bond with a
three-year maturity and annual average yield of 2.77 percent. The bonds
will be distributed through branches of postal service operator Česká
pošta and of banks Česká spořitelna, ČSOB, Komerční banka and
The first retail bond issue took place a year ago and investors ordered over 20 billion crowns worth of bonds; the spring issue this year generated around 15 billion. Bonds were available for both Czechs and foreigners, civic associations, foundations and churches, among others, and in the spring also included regions, towns and public universities.
A group of rebels from within the ruling Civic Democratic Party will not
vote for the government’s tax package unless it is changed so that taxes
are not raised, the group´s informal leader, MP Petr Tluchoř, said on
Monday. He did express confidence an agreement on the legislation could
still be reached. In his view, there is a “broad consensus” within the
party that taxes not be increased; he also rejected the notion the rebels
were trying to subvert the government, which has linked the tax package to
a vote of confidence.
A party working group will discuss the package again on Tuesday morning before meeting with the deputies’ group. Until now the government has maintained the a proposed VAT hike is essential for it to meet its fiscal target in 2013 – to lower the gap in public spending to below 3 percent of GDP. In view of the fact that no compromise has been reached yet, there have been calls from within the party for the vote on the crucial bill to be postponed until after the Civic Democrats’ party conference in early November.
Senators for the Social Democratic Party will file a complaint to the Constitutional Court against the introduction of electronic S-cards for pensions and welfare benefits. Speaking shortly after the party’s election victory in senate elections, party leader Bohuslav Sobotka said this would be one of the first of many government steps the party would try to get revised. The new S-card system has evoked enormous controversy, with critics pointing out that pensioners living in small villages may have problems getting to a money machine and would inevitably lose money on the transaction from their already meagre pensions. Senators moreover point out that people will be forced to have an account at Česká Sporitelna -selected by the government to run the operation - even if they already have an account elsewhere.
Over 1,000 skeletons discovered during renovation of Kutná Hora “bone church”
Language exams for foreigners seeking permanent residency permit to become tougher
Why are Russian and Chinese spying activities in Czech Republic so intense and how exactly do they do it?
Prague’s historical Koh-i-noor factory to be converted into residential area
Gunman kills six patients in Ostrava hospital, two more fighting for their lives