Business News
The Czech Telecom privatisation deal has definitively fallen through. Czech average wage grows, as does the minimum officially guaranteed wage. Trade minister would like to boost trade with Eastern developing countries. State budget deficit rises by 9.4 billion in one month. More redundancies expected at the national rail carrier Ceske Drahy. The current account gap for the third quarter reached just over 50 billion crowns. Finance Minister has announced a package aimed at reforming the health care system.
Another privatisation plan fails amid disagreements over sale price
The government confirmed this week that the sale of Cesky Telecom, the Czech Republic's largest telecoms operator, has collapsed. Under the privatisation plan, a consortium of Deutsche Bank and Tele Denmark would have paid 55 billion Czech crowns - or 1.83 Billion US dollars - for the government's controlling share in the telecommunications company. The sale would have included the government's stake in both the country's largest fixed line operator and Eurotel - the largest mobile operator in the country. J.P. Morgan, the Czech government's tender advisor, blames the collapse of the sale on the fact that the potential buyer and the minority stakeholders failed to agree on prices. After the deal fell through, J.P. Morgan itself made an offer to take over the management of the state's majority share in Cesky Telecom. However, the government has indicated that this is highly unlikely. The minister of information technology, Vladimir Mlynar, was quoted in the Dow Jones Business News as saying the offer raises questions as to whether J.P. Morgan had acted correctly as the privatisation adviser. The failure of the Cesky Telecom deal comes shortly after the government announced the failure of the planned privatisation of Unipetrol, one of this country's largest chemical consortiums.
Czech real wages growing fastest since 1999
The average monthly wage grew by 7.4 % to just under 15 thousand crowns or 500 Euro in November. The increase, the highest since 1999, is largely due to record low inflation of 0.7 %, according to the Czech Statistical Office. The largest increase was seen in the public sector where wages grew by more than 10 %, where as the private sector saw an increase of just over 5%. The average monthly wage in the Czech Republic is lower than that of Slovenia and Poland but higher than Hungary and Slovakia.
Government approves 9% increase in minimum Wage
This week the government approved an increase in the minimum wage of 500 Czech crowns to 6200 crowns or 200 Euro per month, an increase of almost 9 %. The increase will take effect as of January 1st next year. This was lower then the planned 15 percent increase. The government introduced a smaller increase due to slower then expected economic growth in the Czech economy. Economists are split over the implications of the increase. Some argue that it will cause layoffs because the price of labour will increase, others believe that the increase will force employers to utilise their workforce more efficiently.
The Czech Republic to focus more on Eastern markets
Industry and Trade minister Jiri Rusnok has said the Czech Republic should focus more on Eastern developing countries to spur economic growth. Historically, markets in the third world comprised a large percentage of Czech exports, however these markets were lost after the fall of communism. Exports to China and Russia have grown over the past year. Mr. Rusnok said that more growth is needed in this sector if the Czech Republic is to catch up with the European Union in terms of GDP growth in the near future. The main exports to Eastern markets are road vehicles and machinery.
State budget deficit rises by 9.4 billion in one month
The state budget deficit for the month of November has increased by over nine billion Czech crowns to just under 42 billion crowns or 1.4 billion US dollars. The Finance Ministry expects the state budget deficit in 2002 to be higher then the 62 billion crown deficit approved by parliament. It is expected that the total budget deficit for the year 2002 will reach just under 80 billion crowns or 2.6 billion US dollars. In a related story, the ministry plans to issue middle and long term bonds worth a total of 128 billion crowns for next year. The bonds will be used to finance the deficit.
National rail carrier, Ceske Drahy announces it will dismiss 2,000 employees next year
The national rail carrier of the Czech Republic, Ceske Drahy, wants to scale down its workforce from the current 80,000 employees by 2,000 next year. This year the rail operator already laid off 2,500 employees. In the coming year the company will transform from a public organisation into a joint stock company. The new company will operate the railways where as a new separate company will own the railway infrastructure.
Czech current account gap at 50 billion Czech crowns third quarter
The current account gap for the third quarter reached just over 50 billion crowns or over one and a half billion Euro. The Czech National Bank said results for the third quarter were up 32 billion crowns from the second quarter. In current prices, exports dropped by almost 7 per cent year-on- year, while imports were 4 per cent lower. European Union countries accounted for the lions share of exports at 67 per cent of exports and for 60 per cent of imports. On the other hand, because of the impressive inflow of foreign direct investment the financial account showed a surplus, confirming that the Czech economy is still attractive for foreign investors.
Sobotka wants to make drastic cuts to help state finances
Finance Minister Bohuslav Sobotka has announced a package aimed at reforming the health care system. It is hoped that savings of up to 60 billion crowns can be made through higher taxes and cuts in expenditures. The latter strategy involves combating the abuse of social allowances, sickness benefit and home-building savings contributions.
