Business News


In Business News this week: Czech government planning to stimulate growth, approved financial constitution, health insurance companies are falling into debt, and the national brand label “České pivo” increasingly popular with Czech brewers.

Goverment moves to stimulate growth

The Czech government is discussing a package of measures to stimulate economic growth, among them a lower administrative burden, support for projects aimed at creating and maintaining employment, support for exports, support for energy savings and transport infrastructure projects, improving know-how in drawing money from EU funds and others. The 80 or so measures are to be approved by the Cabinet in a more specific form by the end of the month.

Government approves financial constitution

Photo: Barbora Kmentová
The Czech government this week also approved a so-called financial constitution, which sets limits on the size of the state debt. The constitution sets long-term rules for governments on how to manage public debt and avoid a financial crisis, setting maximum caps for government debt as well as spending. The rules will force governments to ask for a confidence vote in Parliament if the public debt exceeds 50 percent of gross domestic product and to take preventive action if the state debt rises above 40 percent of GDP. A newly established National Budget Council is to oversee the government’s fiscal policy.

Czech State Debt rises to 43.3 percent of GDP

Photo: Štěpánka Budková
The Czech Republic’s gross state debt rose to 43.3 percent of gross domestic product at the end of the third quarter, according to a report released by the Finance Ministry this week. The total gross debt rose to 1.65 trillion crowns from 1.64 trillion crowns at the end of the previous quarter, the ministry said in a quarterly review of the state’s debt portfolio. The Czech economy is suffering from weak domestic demand after the government cut investments and raised sales taxes to trim the gap in public spending.

VZP falling into debt

The deficit of the General Health Insurance Company VZP–the largest Czech insurer which has 60 percent of the market– is growing and is expected to reach three-billion crowns by the end of 2012, the company reported. VZP head Pavel Horak said the whole health insurance system lacked on average six billion crowns a year and the balance was being worsened by the state transferring further unplanned expenses to health insurance companies such as one billion for vaccination and two billion for doctors' salaries. The government this week resolutely dismissed the idea of increasing the payment for state policy holders in order to stem the threatening deficit saying measures should be taken to make the system more efficient.VZP has said it may lower its payments for medical treatment which are higher than those paid by other insurers.

Payment discipline of Czech companies slowly improving

Photo: Barbora Kmentová
The payment discipline of Czech companies is gradually improving and is now approaching the level seen before the economic crisis, Michal Veselý, chief executive of the credit insurance company KUPEG, told the ctk news agency on Thursday. The share of defaulters in the Czech Republic is around 6 percent, down from almost 10 percent in 2009. After a problematic period in 2008 and 2009, when defaults of domestic companies almost trebled, we can see a gradual stabilisation of the situation and even a moderate improvement," Veselý said.

National brand label increasingly popular with breweries

The number of Czech brewers using the geographical protection indication from the European Union for the national brand “České pivo” has risen sharply in the past year and is now being used by 12 breweries on 46 brews. The Czech Republic was the first European Union country to gain a national geographic protection label for its beer. Since 2008 any Czech brewery can add the label Ceske pivo to its labelling provided it meets four main conditions: the beer is brewed in the Czech Republic, it contains specific types of ingredients, was made by a specific production technology typical for Czech brewing and the final product meets the required quality standard. Among those using the national brand label are the country’s biggest beer exporters: Prazdroj, Gambrinus, Radegast and Bernard.