EU membership has not brought a feared leap in consumer prices
Economic figures for May had been awaited in the Czech Republic with some apprehension. Not only was it the month when the country joined the European Union, but we also saw one of the most significant tax reforms in the last ten years, to bring value added tax rates in line with other EU countries. Given that we saw a rise in VAT for many goods and services - such as cigarettes or eating in restaurants - there were fears of a leap in overall consumer prices. But latest figures suggest that prices remained relatively stable, and that joining the EU has had little immediate impact on the economy. David Vaughan spoke to Jan Sykora from the financial service providers Wood and Company.
"Obviously we saw price increases, primarily fuelled by the increase in the VAT brackets, but that's something that was to be expected, and I think to a certain extent already accounted for. However I think the overall increase may not have been as large as originally expected.
"But I think it is more important to realize that what are not materializing are the threats that once we join the EU all the prices are going to go further up to European Union levels. That's something that has not materialized, and actually on the contrary, in certain commodities or certain areas, such as residential real estate, where people were speculating that as of 1st May all the rich Dutch, English and Germans will start buying apartments in the centre of our cities, prices are going somewhat down."
"I think where we are getting hit is in the area of services, where we are experiencing an increase from 5 to 19%."
Which parts of the service sector are going to be most hit?
"All services in the past were taxed by 5%, so whether you go to the hairdresser or get your suit tailored, or any service you can think of, obviously this will further increase some of the transaction cost. But the overall impact, if we look at the price levels, has not been that dramatic or that significant."
Another issue that there were some fears about before the Czech Republic joined the European Union was the question of a brain-drain from the Czech Republic. One of the main doctors' leaders was saying that there could be thousands of Czech doctors, who would head for Great Britain, for example, with the opening of the labour market. Are there any signs, or do you have any fears that that sort of brain-drain could happen in the near future?
"I honestly don't think that this is really a threat. We might see some short-term shortcomings or imbalances in certain sectors. You mentioned doctors, nurses, there could be other sectors as well, but in general I think that any type of foreign experience in whatever profession is of great benefit. I think the more Czechs that are working abroad, this in the long term will be of great benefit to the overall wealth of this country. So I think that the more people who are living, working abroad and getting foreign experience, the better for the country."
