Business Report

Police financial crime unit to begin work. Bankruptcy-fraud ring under investigation. Current account deficit deepens. American-style mortgages.

Police financial crime unit to begin work ...

The head of the Czech police, Jiri Kolar, has said that a new specialised police unit devoted to fighting financial crime will begin operating in about six weeks' time. The new financial police will employ some 300 investigators and will, among other powers, have the authority to inspect tax records, without obtaining prior approval from the Czech state prosecutors' office. The unit reportedly will concentrate on cases involving amounts over 50 million crowns.

... bankruptcy-fraud ring under investigation

Meanwhile, the police have charged the former bankruptcy administrator at the arms maker Zbrojovka Brno with fraud. The current administrator said that one billion crowns had been "tunnelled" out of the company. Jiri Berka, the judge who declared the Zbrojovka Brno bankruptcy has also been implicated in the case. Mr Berka is also suspected of being involved in a bankruptcy-fraud ring responsible for asset-stripping at four other companies.

Current account deficit deepens

In economic news, the Czech National Bank announced that the current account deficit grew to 9.2 billion crowns in February, largely due to the trade and budget deficits. The Cabinet, meanwhile, has made clear that it intends to rely on GDP growth and will not look to make up the difference through additional spending cuts.

The finance ministry is predicting an average GDP growth of from 3.2 to 4.5 per cent from 2004 to 2007. During that period the ministry expects the budget deficit will be from 3.9 per cent to 4.5 per cent. President Vaclav Klaus signed a bill allowing the issue of bonds worth over 100 billion crowns to help cover this year's state budget deficit. The government will also take out long-term loans and tap other funds to cover the difference.

American-style mortgages

On the consumer front, the two largest mortgage lenders in the Czech Republic, Ceskomoravska hypotecni banka and Ceska Sporitelna, have separately announced they will begin offering so-called "American mortgages". These loans can be used to pay for other things besides buying homes and are already being offered by several smaller Czech banks. Following a recent change in the law, the higher-interest "mortgages" may also be used to buy housing association or co-operative flats.