Business News

The Czech government approved cuts the proposed 2003 state budget deficit by a third, and made flood relief the top priority. The Czech trade balance worsened in September. The Netherlands removed its objection to the Czech Republics closing of the economic chapter in EU accession negotiations. While one of the country's mobile operators is facing serious financial problems, another one is considering expansion worldwide.

Government cuts 2003 budget deficit by one third

This week the cabinet approved a final version of the state budget, cutting the planned deficit by about a third to 111 billion crowns - or 3.5 billion US dollars - for the fiscal year of 2003. The government, dominated by the Social Democrats, reduced the deficit by 46 billion crowns under pressure from the junior coalition partners, the Freedom Union and the Christian Democrats. The majority of the cuts include the postponement of a planed 40 billion crown payment to cover the debts from the governments factoring agency, the Czech Consolidation Agency - a move that economists argue is simply cosmetic because the government has not placed a strong emphasis on a reduction in spending. Only 1.3 billion crowns was saved by cutting the expenditures of all the ministries by 2 %, of these the defense ministry was the hardest hit with a 1.5 billion crown reduction. Over the last 10 years, the budget deficit of the government has increased dramatically. In the initial period following the introduction of a free market system in the early 1990s the budget was in surplus, in the last year alone the deficit has doubled and reached around 40 billion crowns.

Flood relief top priority of the 2003 budget

The government has made flood relief the top priority for the 2003 budget. The government plans to spend 17 billion crowns - or 550 million euro - on flood relief. The state budget assumes 11 billion crowns whereas the remaining funds will be provided through a loan from the European Investment Bank. The second topmost priority of the 2003 state budget is aimed at education where 500 million crowns has been earmarked for a wage increase for teachers. The third main priority of the budget relates to the accession of the Czech Republic into the European Union. Included in this will be almost 1 billion crowns to be spent largely on the referendum which this country will hold on joining the EU and on an information campaign which will precede it.

The Czech trade balance worsens

The Czech Republics balance of payments in September was 12.6 billion crowns - or 380 million US dollars - in deficit, compared to a surplus of 3 billion crowns last September. While imports rose significantly, exports remained largely unchanged. The Czech Statistics Office attributes the large growth in imports to the opening up of new retail outlets by foreign investors, the repair of damage caused by the devastating floods in August, and the strong Czech crown which has made foreign goods cheaper for Czech consumers. This compounded by the fact that a number of businesses are still trying to recover after the August floods negatively affected the trade balance.

One more accession chapter to be closed by Czech Republic

The Netherlands has removed its objection to the Czech Republics closing of the economic chapter in its accession negotiations with the European Union. The Netherlands had previously rejected the closing of the economic chapter because there were no guarantees that the restructuring of the Czech steel sector would take place before the admission of the Czech Republic to the European Union in 2004. The European Commission has provided The Hague with a guarantee that state assistance to a number of large Czech steel companies would cease in 2006. This means that the Czech Republic will close a vital chapter in the accession process just in time for the EU summit which takes place today (on Thursday) in Brussels.

Financial woes for the countrys third largest mobile operator

The Czech Republics third largest mobile operator, Oskar, faces financial troubles. The operator says a sell-off is a strong possibility because of the companys Canadian owners - Telesystem International Wireless - is scrambling to repay a large loan which is due at the end of year. Over the last year, the mobile operator has posted a net loss of $90 million US dollars. Oskar holds an estimated 14-percent share in the Czech mobile market. In a related story, the Czech Republics largest mobile operator - Eurotel - has hinted that it is looking to expand its presence in the domestic and international telecommunication market. The company feels that this is necessary in order to fuel its continued expansion on an almost saturated domestic market.