In Business News this week: the Czech Finance Minister warns of disastrous consequences the fall of the euro would have for Czech economy; Czech banks pass new stress tests but Moody’s downgrades their outlook to ‘negative’; Westinghouse signs cooperation deal with Vítkovice engineering firm; Škoda Auto announces plans to develop a new SUV model; and Nová Paka in eastern Bohemia is named the Czech town for business.
Finance Minister warns of disastrous consequences of euro collapse
Miroslav Kalousek
Czech Finance Minister Miroslav Kalousek has warned of disastrous consequences the collapse of the euro would have for the Czech economy. Speaking in Prague on Thursday, Mr Kalousek said a systemic financial collapse of the Eurozone would have a fatal economic, fiscal and social impact on the Czech Republic; all political parties would have to come together to face the challenge as the country would ‘struggle to survive’. Mr Kalousek said that next year Czechs are “more likely than not” to face problems they could not have imagined since the fall of communism. When asked whether the government was outlining any contingency plan, Mr Kalousek said they would not be doing their jobs right if they weren’t.
Czech banks pass new stress tests…
Czech National Bank, photo: Štěpánka Budková
The Czech National Bank on Tuesday released the results of a stress test Czech banks underwent in September. The test showed sufficient stability of the banking sector even in the case of a double-dip scenario, combining a negative development of the Czech economy with an escalation of the fiscal crisis in the Eurozone, the central bank said. The banks’ capital adequacy ratio is high, reaching 15.7 percent by the end of September. As part of the test, the central bank wrote off all bonds of the endangered Eurozone countries held by Czech banks which by the end of September amounted to 24 billion crowns. The test showed that credit risk represented the major threat for the Czech banking sector; Czech banks’ credit risk reached 8.9 percent and is on the rise.
…but Moody’s downgrades their outlook to ‘negative’
Photo: Štěpánka Budková
Two days after the Czech central bank released the results of its stress test, the Moody’s rating agency on Thursday downgraded Czech banks’ outlook from ‘stable’ to ‘negative’. The agency’s report reflects its view that the banks’ operating environment will weaken, driven by the expectation that GDP growth will decelerate to 1.9% in 2011 and to 0.6% in 2012, well below pre-crisis levels. That will create renewed pressure on the banks’ asset quality and impair their profitability and capitalization, the Moody’s report said.
Westinghouse signs deal with Vítkovice engineering firm
Temelín nuclear power plant
The US-Japanese firm Westinghouse on Thursday signed a cooperation agreement with the Czech engineering company Vítkovice with a view to supply components for two planned blocks at the Temelín nuclear power plant. Westinghouse is one of three bidders in a multi-billion tender to build new reactors at the Temelín plant, along with France’s Areva and the Russian state enterprise Atomstroiexport. Vítkovice, one of the Czech Republic’s largest engineering firms, signed a similar deal with the Russian bidder in October while Areva says it is close to concluding an agreement on future cooperation with the Vítkovice firm as well.
Škoda Auto announces plans to develop new SUV model
The German-owned, Czech-based car manufacturer Škoda Auto has announced plans to develop a new SUV model. Škoda CEO Winfried Vahland told the Czech edition of Forbes magazine on Tuesday the new vehicle would be a class larger than Škoda’s current Yeti model, and should compete with cars such as Kia Sorento. The development of the new car, which could be named Bigfoot according to some media reports, is only in the early stages and could take up to five years to complete, Mr Vahland said. The news suggests that Škoda could in the future also manufacture higher class cars although its owner, the Volkswagen group, would like the producer to focus on cheaper models, such as Citigo and Rapid.
Nová Paka named Czech Republic’s best town for business
Nová Paka, photo: János Korom Dr., CC BY-SA 2.0 Generic
Nová Paka in eastern Bohemia is the Czech Republic’s Best Town for Business this year, according to an annual study by the business weekly Ekonom. Nová Paka, a town with 10,000 inhabitants located some 90 kilometres north-east of Prague, came second in last year’s poll. This time, the town won thanks to high ratings in the locality category which focuses on environmental issues, crime levels, numbers of beds in hotels and hospitals, and so on. Second and third in the study came Humpolec and Nové Město nad Metují, respectively, also in eastern Bohemia. The best rated town in the category of entrepreneurial environment is Brno.
