Business News

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In this week’s Business News: a warning from Brussels over public finances; price rises become passé; a new owner to swallow Staropramen; CSA pilots hold out against restructuring; and all fuelled up over power policy.

EU Commission casts Czechs into high risk public finance group

The Czech Republic has been given a public rap over the knuckles by the European Commission over the sustainability of its long term public finances. The country was included in a group of 13 EU member states which were picked out as facing the highest risks for the future. It is rubbing shoulders with Latvia, Ireland and Britain. One of the big problems for the Czechs was the failure so far to take steps to prepare for an ageing population. The Commission report estimates that reforms and savings amounting to 7.4 percent of the country’s Gross Domestic Product will have to take effect to get public finance back on an even keel.

Inflation loses its sting

Foto: Štěpánka Budková
Figures from the Czech Statistical Office suggest that price rises have started to become a thing of the past. The office earlier reported that consumer inflation in September was zero compared with a year earlier. It has now released figures on the September trend of prices at factory and farm gates and for services. Farm prices are down by around a fifth and industrial prices by just over 5.0 percent, although prices for services inched 1.1 percent higher compared with a year earlier. It is the biggest drop in industrial prices since statistics have been recorded.

Private equity group seals Staropramen deal

After almost a year of haggling about the price, the world’s biggest private equity company CVC Capital Partners has finally clinched a deal to swallow Czech brewer Staropramen and other breweries in central and eastern Europe. It is paying the world’s number one brewer, Anheuser Busch-InBev, 2.2 billion dollars, with a top up payment of another 800 million if things turn out well. As well as Prague brewery Staropramen, CVC also picks up the Ostravar and Měštan brands. Staropramen is the second biggest brewery group in the Czech Republic.

Pilots stall Czech Airlines restructuring

Plans to radically restructure state-controlled carrier Czech Airlines appear to be up in the air. The man called in to push through emergency measures, Václav Novák, this week tabled proposals to cut costs by 3.0 billion crowns. These include a 40 percent cut in pilots’ pay. The pilots have, not surprising, rejected such deep wage cuts. They have offered unconditional cuts of 15 percent but say deeper measures are only acceptable if the carrier stays in state hands and the current management is kicked out. Meanwhile, the cash strapped airline has put up its duty free businesses at Prague and Karlovy Vary airports for sale.

Ministry fuels debate over power policy

Energy security has been a big issue this week with the industry ministry tabling its proposals for the power sector until 2050. This counts on more nuclear and mining of brown coal beyond the existing environmental limits. Attention has focussed on whether more nuclear would actually increase Czech dependence on Russia for basic energy supplies. Electricity giant CEZ has already switched to buying nuclear fuel rods from Russian state company Tvel, which now wants to build a processing plant in the Czech Republic. But it emerged this week that the ministry is hatching its own plans for such a plant in cooperation with the Baltic States, Slovakia, Poland and Hungary.