Business News

In this week's Business News: the Czech government has decided to end state subsidies for school milk programmes; why Czech banks are cutting mortgage rates and why the country is being flooded by ever cheaper imported Chinese shoes; new data from the European Foundation for the Improvement of Living and Working Conditions suggests that Czech worker pay has fallen by 1.3 percent in the last year and a a key member of the Czech National Bank’s board has said that he does not recommend that the Czech Republic adopt the Euro in the near future

Government ends school milk subsidies

The Czech government has decided to end state subsidies for school milk programmes, according to the Ministry of Agriculture. The move comes as various milk providers threaten legal action against the government for potential lost revenue. Milk producers argue that they have invested around 100 million in the scheme, for example providing milk-vending machines and refrigerators to schools. In the future, school milk will be partially subsidized by EU funds. The decision was taken in order to reduce spending at the ministry and the move will save an estimated 60 million crowns out of proposed cuts of five billion.

Czech banks cut mortgage rates

Czech banks are cutting mortgage rates in response to a recent decision by the Czech National Bank to cut its benchmark interest rate by 0.25 percentage points to 3.5%. Several banks eventually followed the Czech National Bank move by cutting their own mortgage rates. For example, Komerční banka lowered borrowing rates by 0.5%. However, mortgage rates in the Czech Republic still remain higher than in 2007 when average interest rates were 4.67% - today most banks offer rates between five and six percent. Analysts predict that since many banks have been slow to respond, further rate cuts can be expected in the near future.

Cheap Chinese shoes “flooding” Czech Republic

The Czech Republic is being flooded by ever cheaper imported Chinese shoes, according to the Czech Shoe and Leather Goods Association. Last year, the country received around 86 million pairs of shoes from China, with an average import price of only 30 crowns. This has caused Czech shoemakers to warn that such a volume of imports is threatening domestic production – in the last seventeen years, Czech production has fallen more than tenfold, from 71 million pairs in 1990 to around 5.1 million in 2007. The Association also notes that Chinese imports are now often competing in terms of quality as well as price. However, the sheer numbers of imports have also led to some unusual calculations – around 15 pairs of shoes per person per year, which means that in fact, much of the imports passing through the Czech Republic are being exported on to other destinations.

Czech sees fall in worker pay

New data from the European Foundation for the Improvement of Living and Working Conditions or Eurofond suggests that Czech worker pay has fallen by 1.3 percent in the last year – almost the largest decrease in the EU. However, the figures have been disputed by the The Bohemian-Moravian Confederation of Trade Unions, which argues that wages dependant on collective bargaining had in fact increased by 4.6% according to the Czechs Statistical Office. The Confederation has asked Eurofond to provide them with additional data as to how they came up with their figure. The figures for the entire EU are in marked contrast with Czech figures, suggesting a 2.3% increase in real wages.

Czech National Bank member says Czech not yet ready for Euro

Photo: European Commission

Robert Holman, a key member of the Czech National Bank’s board has said that he would not recommend that the Czech Republic adopt the Euro in the near future, in an interview with the Czech daily Právo. He added that the country must first enact a series of reforms, tightening fiscal discipline and changing the labour market. The comments come as neighbouring Slovakia moves closer to adopting the Euro, while a concrete decision in the Czech Republic has yet to be made, with an early timetable of 2012 now abandoned. Slovakia will formally adopt the Euro in January 2009.