The Temelin nuclear power plant in South Bohemia, which is soon to be started up, has been dominating the headlines this week and so later, we'll be looking at the economic effects of a second nuclear power plant for the Czech Republic. But first let's have a look at other economic stories which have been making waves this week.
Skanska taking over IPS
In two separate operations the construction group Skanska is acquiring 66.1% of IPS, and is also planning to buy more from IPS's minor shareholders. Skanska is one of the wold's leading groups in construction services and project development. Founded in the 19th century it is now operating in some 50 countries and employs around 45,000 people.
Skanska Europe has recently gained a controlling interest in the Polish building company Exbud. And so it looks like Skanska will soon become the leading construction company in Central Europe.
IPS, based in Prague, is the largest construction company in the country and was founded back in 1953. Following privatisation in 1992, it has built up an entire construction chain. The company now focuses on project development, housing construction, and also roads and railways. IPS's net sales for last year reached 18.2 billion Czech crowns.
North Moravian Vitkovice ended up with loss 10.4 billion
After an official audit the former steel giant Vitkovice has declared losses of 10.4 billion Czech crowns for last year. The company has undergone major changes in management this year, the latest being the appointment of Vaclav Novak as executive director. Vitkovice has been on the edge of bankruptcy for some time, only recently reaching a stabilisation agreement with several banks after intervention by the Czech government. The company is currently operating under such a tight financial plan that Vitkovice employees are even being given their wages several weeks late. The difficult wage situation has been going on for almost a year now, and has become somewhat of a sad reality in Ostrava.
Similarly to Komercni Banka, Vitkovice is also suing their former management. But in the case of Vitkovice the majority shareholder is still the government, through the National Property Fund. Therefore it's the state which is being blamed for not taking action earlier and letting the situation go so far. Currently employing some 11,000 people and with essential redundancies planned, the future doesn't look bright for the Ostrava steel industry.
The ongoing IPB saga
All ten MP candidates were approved by the lower house of parliament this week for a new parliamentary committee investigating the near collapse and dramatic rescue of the IPB bank. They have one year to find out why IPB ended up so badly and what led the government to resort to such drastic action during its take-over. The committee will also have to investigate the forced administration and following quick sale of IPB to CSOB. Former prime minister Vaclav Klaus, whose government privatised IPB, described this action as "a bank robbery in broad day light". Each parliamentary party has two members in the newly elected committee. Parliament has also decided to renew its committee to watch over the Czech banking sector in general.
CSU finally updating its methods
The Czech Statistical Office has announced that it will update the goods they use for calculating the consumer price index. The current indicators are based on prices from 1993, therefore rather out of date and failing to correspond with the current development of the Czech economy. The new indexes will be based on last year's prices. And so the average inflation index which will be published later this month should be lower than usual as a result. The CSU has also decided to create a completely new index, something which they call the harmonized consumer price index. This should correspond fully with the index countries that the EU uses and compatible with the goods they use for the calculation of their indexes.
And staying with statistics: the CSU has bumped up their estimate of Czech Gross National Product for the year 2000 from 1.4 to 2 percent.
Amendment of Czech National Bank law
The lower house of the Czech parliament has began a final reading of a controversial bill to amend the central bank law. Numerous amendments to the bill have provoked criticism from the central bank and several international institutions, including the International Monetary Fund. The original draft was prepared by the government to bring the Czech central bank closer to the European Union norms, but M.P.s have attached a number of amendments to the bill which the central bank says may limit its independence and make conduct of monetary policy difficult. Disagreements between the parliament and the central bank date back to the Klaus era, when his opinions on monetary policy differed strongly from the bank's actions.
Does Czech Republic need nuclear energy?
With annual revenues reaching 70 billion Czech crowns, the electric power industry is no doubt one of the most important sectors of the Czech economy. However, the problem is that it is still largely run and regulated by the state itself. CEZ - the country's largest power generating and distributing company - is majority-owned by the state, as are other small regional distribution companies. At the time when many are calling for privatization of the energy sector, which will have to happen anyway, the Czechs are currently more concerned with the now-complete Temelin nuclear power station in South Bohemia.
The loading of fuel at Temelin over the weekend has caused some concern amongst the public. On Tuesday a group of environmental activists submitted to parliament a petition called Referendum 2000, containing the signatures of over 100,000 people who want to have their say on the future of the nuclear power plant. I asked Referendum 2000 spokesman Petr Stepanek whether the Czech Republic really needed a second nuclear power station. But leaving aside the safety arguments, many say that scrapping Temelin now, after 20 years of development and almost one100 billion crowns in taxpayer's money, is insanity. Some, like commentator Vaclav Pinkava, believe the Czech Republic will find a use for the energy produced at Temelin. That's all for this week. Vladimir Tax will be back next week, once he returns from his very own tax haven in the Czech countryside.