Business News

Parliament debates fiscal reforms. Foreign trade deficits narrows to 7 billion CZK. A 27-percent stake in Czech Telecom up for sale. EIB lends 75 million euros for construction of Prague Metro.

Business News

Parliament debates fiscal reforms

Finance minister Bohuslav Sobotka, photo: CTK

The lower house of Czech parliament has started a session this week to debate a package of 13 bills that constitute a complex fiscal reform put forth by the centre-left government led by Social Democrats. The reforms aim at cutting the widening fiscal deficit and preparing the country for euro adoption. The future of the reforms is key to the government's survival and for the stability of the currency. Financial markets assign more than a 50-percent chance of the bills to be passed by Parliament. Analysts warn against efforts by certain parliamentary factions and lobby groups to make changes to the reforms. The most damaging would be amendments that would further increase the tax burden. This would prove counterproductive because they would diminish the purchasing power of households with consequent weakening of aggregate demand and a slowdown of the whole economy, resulting in lower tax revenues. The reforms include changes in both direct and indirect taxes, social welfare, health care and pensions, as well as a wage freeze and massive redundancies in the public sector.

Foreign trade deficits narrows

The Czech trade balance posted a monthly deficit of 7 billion crowns (or over 240 million USD) in August. The Czech Statistics Office said the trade deficit narrowed from an almost 12-billion-crown shortfall in July but widened compared with a 5-billion gap in August last year. The higher external trade deficit is primarily due to higher imports of crude oil, both in value and volume.

Telsource to offer 27-percent Czech Telecom stake

The Dutch-Swiss consortium Telsource will put its 27-percent stake in the leading Czech phone company Czech Telecom on offer. The 27-percent stake in Czech Telecom has a value of nearly a billion USD. The news sent Telecoms stock plunging by almost 15 percent on Monday. Swisscom said only it was in no hurry to make a deal given the current gloomy environment in the telecoms industry. The Czech government holds a 51-percent stake in Telecom but plans to sell it to a strategic investor. The steep fall in the share price is therefore unwelcome and may prompt the Czech government to consider whether to support the deal.

EIB lends 75 million euros for construction of Prague Metro

The European Investment Bank has granted a loan of 75 million euros to the city of Prague for the construction of an extension of Prague Metro. Representatives of the European Investment Bank and the City of Prague signed the deal on Wednesday. Prague is investing massively in its public transport systems with the goal to reduce congestion and pollution, and to modernise its system to reach European standards. The project will extend Prague's metro line C by 4.6 kilometres and 3 stations in the northeast of the City. This area of Prague is subject of significant demographic and economic development but it is insufficiently served by public transport, with heavy reliance on buses.