Books on Czech Republic
% of GDP
Update No: 096 - (26/04/05)
Czech coalition agrees cabinet
Leaders of the Czech coalition government have agreed to form a new Cabinet
after Prime Minister Stanislav Gross said he would quit over a property scandal.
After an almost eight-hour meeting, Gross said his Social Democrats reached
agreement on the government with the Christian Democrats and the Freedom Union
parties, resolving a political crisis triggered by the scandal over the
financing of his luxury apartment.
"We prepared the basic points of an agreement about co-operation of three
parties in forming a majority, democratic, pro-European Cabinet," Gross
said after the meeting. He said he would inform President Vaclav Klaus about the
Christian Democrat chairman Miroslav Kalousek said the agreement guarantees the
country will have an "effectively functioning" government until the
next general election, scheduled for spring 2006.
The leaders gave no details on the new Cabinet, saying they first have to inform
their parties, but Gross said earlier that the Czech ambassador to the European
Union, Jan Kohout, was his party's candidate to replace him.
End of a crisis
The agreement seems to bring an end to weeks of political crisis triggered by a
scandal surrounding the prime minister's financing of his luxury apartment.
Five ministers resigned from his Cabinet in early April, while the other two
coalition parties demanded Gross leave his post to restore confidence in the
The scandal arose over how Gross paid for his luxury apartment. He first said he
paid for it with his own money and a mortgage, but then he said he borrowed
money from his uncle. Czech media later reported that his uncle borrowed the
cash from a journalist he barely knew. After weeks of struggling to hold his
government together, Gross said that he would resign and make way for a new
The communists make a comeback
One intriguing aspect of the whole affair was the role of the communists, who
alone in Central Europe still count on the Czech scene and increasingly so.
At one moment in the crisis Gross survived a no-confidence vote in parliament,
but only because the communists, who have one fifth of the seats in the lower
house, abstained. The Communist Party of Bohemia and Moravia, as they style
themselves, are unreconstructed hardliners, unlike the Communist Party of
Moldova, which is actually in power.
Elsewhere in Central Europe the communist parties changed their names after
1989. In Czechoslovakia after 1968 the CP was purged of liberal, reformist
elements, such as nudged other countries in the region towards the West in the
1970s and 1980s. Dubcek was pensioned off and there was to be no more Prague
It was more a question of 'Prague Winter,' as Jiri Pehe, an adviser to former
President Havel, entitled a most perceptive piece in the Wall Street Journal
Europe of April 7th. "Lacking reformers in their ranks, the Czechoslovak
Communists stuck to their ideology. Their strategy was to become a far-left
alternative to the Social Democrats who had been eliminated after the Communist
putsch in 1948, but successfully re-emerged after the Velvet Revolution (in
Most people expected the communists to fade away, appealing only to older
people. They were not banned, despite the Czech parliament passing a law in 1993
(In January of that year Czechoslovakia ceased to exist) denouncing the
Communist regime and its ideology as criminal. It did not seem a very
appropriate thing to ban a party when founding a democracy.
The result could not have been more favourable to the communists. Shunned by the
other parties, they have been kept right out of power and have not been tainted
by the corruption scandals of the others, at one time or another in a coalition
government. " They did not have to carry the burden of necessary but
unpopular economic reforms," as Pehe says, "and, lacking opportunity,
they have not been involved in any of the various privatisation scandals. As a
result, we have arrived at the absurd situation where an increasing number of
young people, who were still children when the regime collapsed, believe the
Communists are the only 'clean' party around."
In an extraordinary development, the communists have come to fill the gap left
behind by the demise of the far-right Republican Party. "Catering to both
ends of the political spectrum, the Communists manage to represent not only
those voters for whom the Social Democrats are not sufficiently leftist, but
also voters who are nationalists, xenophobic and anti-European." The party
has cynically opposed any reconciliation with the Sudeten Germans expelled in
Pehe is generous enough to say, however: "It would be unjust, though, to
call all supporters of the Communist Party extremists. There are social groups
in the Czech Republic that have been left behind in the rapid process of
economic transformation - and the Communists give these people a vote."
An explosive mixture?
All this makes for startling reading. Is a communist return to power at all
Most probably not. As hardliners, they have a terrible record to defend, even if
a long time ago. The old people are dying off and not enough of the credulous
youngsters will replace them.
The fact is that the communists have never topped 25% of the vote, their score
in 1948. They have not, indeed, topped 20% since 1989. There are enough sensible
people in the country to keep them out.
CEZ to rebuild Tusimice plant
There is a need for one more thermal power station in the country, the Czech
state run power producer, CEZ, said in a statement, CTK News Agency reported.
CEZ said it would rebuild the Tusimice II thermal power station and the cost
will be about 15bn Czech crowns. According to CEZ's Jiri Borovec, construction
should start in 2007 and the project should be complete in all respects and
launched with full capacity by the end of 2010. CEZ plans to announce a plan for
their renewal or the construction of new facilities after May 15th. This has to
be decided early because the life span of most coal fired plants presently run
by CEZ will expire by 2015. "The reconstruction of a specific power station
depends on the supplies of coal throughout its life and Tusimice would have
enough coal from local mines for its entire life span of 25 years," said
Borovec. The Tusimice plant with installed output of 800 megawatts in four units
now employs 240 staff. After the reconstruction, it will have to sack 40 people
owing to cutting-edge technologies.
FOOD & DRINK
Czech meat output drops 19%
Czech meat output, excluding poultry, dropped 18.9% to 33,446 tonnes in
February, the Czech Statistical Office (CSU) said recently, CTK News Agency
Slaughtered bulls meat increased 8.3%; price and demand for this meat rose in
the period. There was an increase in the price for slaughtered pigs because its
output was down 35.5% year-on-year. Farmers supplied 18% less pork and 22.8%
less beef and veal in February than a year ago. The head of the Czech Meat
Processors Association, Ladislav Steinhauser, said recently that there is a
shortage of beef all over Europe and Czech farmers are exporting live cattle
which pushes up prices on the domestic market. The number of slaughtered cattle
decreased 22.3% year-on-year and average slaughter weight dropped 0.5% to
526.2kg. The number of slaughtered pigs was 13% lower and their average
slaughter weight fell 4.5% to 111.9kg. Milk purchases were also lower by 3.5% in
February compared to a year ago.
Telecom ups broadband coverage
Cesky Telecom, the leading operator in the Czech Republic, is increasing the
range and coverage of its broadband service by a further seven per cent,
telecomweb.com reported recently.
The number of subscribers has risen substantially over the past year. As part of
an aggressive broadband plan, it has expanded its range. The expansion opens up
the market to another 210,000 potential customers. Cesky has been particularly
aggressive in terms of widening its broadband coverage in 2005. With this
increase, its coverage has grown to a potential customer base of close to three
million lines that is nearly 90 per cent of Cesky potential customer base. The
operator has seen explosive growth in broadband. It shows that the use of
internet services is the requirement of every citizen today. In its recent full
year results, Cesky said that it had 101,000 ADSL customers at the end of 2004,
a year-on-year increase of well over 500 per cent. To communicate with each
other through broadband does not take much time, also there video linking in
addition to data. So its expansion for more broadband services has become very
important for Czech Telecom.
MINERALS & METALS
Nine firms bid for Czech steel manufacturer Vitkovice
Czech steel manufacturer, Vitkovice Steel, is off-loading the state's majority
stake in the company, New Europe reported recently.
A spokeswoman for its parent company indicated that nine companies have
submitted bids for the state's 99 per cent stake. Nineteen companies had
initially expressed an interest in Vitkovice Steel. The company has a
1,600-strong workforce and made a pre-tax profit of 1.6bn Czech crowns in 2004.
Eva Kijonkova, spokeswoman for Osinek, the company through which the government
holds the stake, said that the bids ranged from four billion crowns (134m Euro)
to seven billion crowns. As per the estimates of the analysts, the government
could get 4.0 to 4.5bn crowns for its stake. Kijonkova did not reveal the names
of companies that submitted bids but said Mittal Steel, which had been fighting
to be allowed to take part, had not placed a bid. Mittal has been in dispute
with the government over pig iron prices and says it will now try to stop the
sale after a privatisation committee excluded it from participating. Mittal has
lodged a complaint about its elimination from the tender to the European Union
Commission. It is demanding 350m crowns in compensation for iron supplies from
its unit VPO to Vitkovice Steel. The state blames Mittal for an inadequate
increase in prices and is asking for more than one billion crowns in
compensation. The anti-trust office ruled earlier in March that the prices were
market prices. Meanwhile, the Ukraine-based group System Capital Management has
confirmed that it had submitted a bid for Vitkovice. "We are ready to
provide sufficient investment for the further development of Vitkovice
Steel," manager, Igor Syry said.
Czech minister says Telefonica best bidder for Telecom
The privatisation of the Cesky Telecom is about to be completed - the Czech
government has decided to sell the state share in Cesky Telecom to the Spanish
company Telefonica, Czech Radio 1 reported.
The telecommunications giant is to pay almost 83bn Czech korunas for 51 per cent
of shares in Cesky Telecom.
"The prices reflect the company's value and therefore with a clear
conscience I recommended to the government the same thing as the privatisation
commission - that was, to sell to the highest bidder," Czech Finance
Minister, Bohuslav Sobotka, said.
The Transport Infrastructure Fund was waiting for the sale to proceed - as it is
to receive more than 26bn korunas from the overall sum.
Czech Republic attracts Britons
New budget airline links to Britain helped the Czech Republic attract a record
number of foreign visitors last year, the government's Czech Tourism agency said
recently, New Europe reported.
The total number of tourists rose to more than 7.9m, the agency said, up 19%
from the previous record set in 2003. Nearly 800,000 British visitors visited
the country - a 58% increase from the year before - mainly because budget
airlines launched flights between Prague and cities such as Manchester and
Birmingham, said Czech Tourism Director, Rostislav Vondruska. Czech destinations
also drew nearly two million German tourists last year, up 9% from 2003. The
ranks of Italian, Dutch and Russian tourists also grew last year, but fewer
visitors came to the Czech Republic from Israel and Poland.