Business News

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Unemployment stagnates

The Czech unemployment rate has stagnated at 8.5 percent in September and was 0.3 percentage points lower than in the same period of 2000. The year-on-year decrease is mainly due to an economic revival in the country. There was an increase in the percentage of fresh school graduates among those registered at labour offices to nearly 15 percent, but this figure is expected to drop again in the coming months. The lowest unemployment rate remains in the capital Prague and surrounding regions of Central Bohemia - around three percent. The highest number of jobless people - more than 15 percent - was reported in the North Bohemian and North Moravian industrial and coal-mining regions, with the absolutely highest figure in the region of Most - over 21 percent. On average, there are 7 applicants for one vacancy, however, in the regions with the highest unemployment it is as much as 50. Generally, economic analysts say there are opposing trends in the economy - on the one hand, a number of jobs are being created at new operations opened by foreign investors throughout the country, on the other many companies have been laying off workers due to ongoing restructuring processes and lower demand. The Czech unemployment rate is expected to decline slightly in the next two months, but then rise again to the current level due to the end of seasonal works in agriculture and construction.

Besides the security implications of the latest developments, the US-led fight against global terrorism also leaves open many questions concerning the economic implications. Economic analyst Martin Kupka from Patria Finance perceives a threefold effect of the terrorist attacks and retaliatory measures on the world economy:

The question now is whether the development will eventually result in a world-wide recession or whether it will just hit some countries. As far as the Czech Republic is concerned, its export-oriented economy is more vulnerable to external factors:

New fighter jets on the horizon?

And staying with the implications of the fight against terrorism, and the question has been raised whether the Czech Republic should increase its defence spending. One of the points of discussion has been a planned acquisition of modern supersonic fighter jets to replace the Czech Air Force's outdated fleet of Soviet-made MiGs. In view of the latest developments in the world, the number of Czechs who are in favour of the acquisition of modern aircraft has tripled since the terrorist attacks on the United States a month ago. According to an opinion poll conducted last week 35 percent of Czechs think the government should purchase them without delay, 30 percent of poll respondents think they should be acquired as soon as the country's financial situation enables it. A year and a half ago, only 11 percent of Czechs thought the Czech Republic needed new fighter jets. The Czech Prime Minister Milos Zeman likewise sees the terrorist attacks against the United States as a strong argument in favour of making the purchase. He has suggested that all parliamentary parties should join in the debate. The question whether or not to replace the Czech Armed Forces' fleet of outdated fighter jets with modern planes has been a matter of controversy mainly due to the financial burden that such a purchase would impose. However, it seem now that the public tender is more likely to get the go-ahead in the Lower House. Ivan Pilip is an MP for the opposition right-of-center Freedom Union party and a former finance minister:

Russian debt settlement

The Czech Republic and Russia have agreed on a settlement of Russia's debt from the Soviet Union era in a deal which could set a precedent for Russia's debt talks with other former Communist countries. Under the deal, Russia agreed to repay 2.5 billion USD, which is about two thirds of the total debt. The remaining part of the debt will be paid between now and 2020 in cash, goods, and will be partly used for a guarantee fund for Czech exports to Russia.

In Moscow, the deal has been presented as an important precedent for the settlement of Russia's debts to other former COMECON countries, amounting to a total of 14 billion USD. Czech government officials describe the deal as a success. However, economic analysts are not convinced that the arrangement is a great achievement. Juergen Odenaus is the global head of emerging markets strategy of Commerzbank in London:

At the same time, the Czech government agreed to sell the claim - 2.5 billion USD - to a private company, Falkon Capital, for slightly over 500 million USD, which is some 23 percent of the debts' face value. Falkon Capital is supposed to pay its dues to the Czech government by the end of this year. Observers say the arrangement with Falkon Capital is on the verge of profitability or outright disadvantageous, although government officials deny that. Juergen Odenaus sees it as a highly unusual transaction:

Observers see the reason why the Czech government opted for such an arrangement in the fact that it already included the 20 billion CZK from the Russian debt repayment into the 2002 state budget draft and therefore agreed to such an unfavourable compromise.