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CZECH REPUBLIC


 



Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 85,438 69,590 56,800 39
         
GNI per capita
 US $ 6,740 5,560 5,250 66
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 117 - (22/02/07)

The knife-edge is over
The Czech Republic's politics was on a knife-edge, with the government coalition and the opposition one each having 100 seats in the 200-seat parliament. But the opposition Social Democrats (CSSD) on February 10th expelled a party member for breaking ranks during a recent no-confidence vote in the centre-right coalition government. 
Milos Melcak left the hall during the vote allowing the minority alliance under Prime Minister Mirek Topolanek of the Civic Democratic Party (ODS) to secure a majority. The rebel lawmaker justified his actions by saying he had wanted an end to seven months of difficult coalition negotiations. 
His party however called his conduct 'inexcusable.' A second CSSD member who had also abstained from the vote earlier quit the party of his own accord.
As one might imagine charges of having been bought have been levelled at both of them. The Czech political economy is notoriously corrupt. 
Still, it would have been a stupid, as well as immoral, thing for the government to have done. It was bound to be suspected and, if true, bound to come out in some way or another. The likelihood is that the government reckoned that somebody would voluntarily abscond from the opposition, which is exactly what appears to have happened.

The Czechs (and Poles) are banking on America, not Europe 
If the situation in Czech politics has greatly eased, there is a new froideur in world politics, with a massive disenchantment with the US and a new build-up in Russian arms (see Russia). The Czechs and the Poles are in the eye of the potential storm. 
Both are Donald Rumsfeld's archetypal "new Europeans." They have a history of being preyed on by mightier neighbours, basically Russia and Germany, and betrayed by Western Europeans. They have been warning for years that Russia will return as a world power and not necessarily as a benign and allied "democracy." They feel vindicated by developments under Vladimir Putin. 
In the days of the Warsaw Pact the Czechs were in subjection to Moscow. It should have been called the Yalta Soviet Pact. 
Now they and the Poles are looking westwards, but further than Western Europe to the US. The Czechs have never forgotten what happened to them as a result of accepting the French guarantee of their security in the 1930s and the Munich Pact of September1938, under which France, under the instigation of the British, solemnly broke it. Within six months they were overrun by the Nazis and were later to be by the Soviets, a subordination to totalitarianism that was to last fifty years almost to the month.
When the Cold War ended with the Central Europeans kicking out the Russians, the former Warsaw Pact countries were left in a security vacuum. Russia wanted to create a cordon sanitaire in Europe between itself and the EU and NATO. For the Central Europeans, Western integration became a national imperative to keep Russia at bay. 
The former Soviet satellites were brought into NATO in the 1990s and the EU in 2004. But while happy to be members, the Poles and the Czechs are the biggest Eurosceptics of the 10 countries that joined in 2004. They are suspicious of the Germans and patronised by the French. They share the British preferences for the EU, for strong transatlantic ties, minimal political union and no fiscal harmonisation. 
They would never turn to Germany or France for security. They see America as indispensable, their security guarantor of last resort.

A new missile defence system
The United States announced in January that it wants to build a missile defence system in Central Europe, basing a missile interceptor site in Poland and a radar system in the Czech Republic. In hitching their fortunes to the Pentagon's missile shield programme, the Poles and Czechs are taking out an insurance policy against Russia. 
Within about five years the US hopes to have deployed 10 interceptor missiles at a huge silo, probably in north-eastern Poland, to be fired into space to take out rogue rockets heading towards America (from say Iran, but Putin mocks this saying it is clearly intended a re-run of the Cold war to interdict Russian missiles), with radar facilities for the project in the neighbouring Czech Republic. The US officially asked the Czech Republic to host the radar base, now planned to be located in a military zone some 50 kilometres south-west of Prague, soon after the centre-right cabinet passed a confidence vote on January 19. 
That is the plan, although there are strong reservations over whether "Son of Star Wars" will ever fly.
For the Poles and the Czechs, whether the missile shield works is beside the point. What counts in Warsaw and Prague is getting US bases on their territory. That makes them feel safe. 
The bases put the Americans in Poland and the Czech Republic as never before. Public opinion is hostile or wary. A referendum on whether to take part would probably be unwinnable in either country. Which is why no referendums will be held. 

Czech Greens make a decision on US radar 
Czech Greens made their position on a radar base for a planned US missile shield at the party's congress in mid-January in what could become a test of the country's new centre- right coalition. 
Top Green politicians asked the congress to adopt a position for the Greens to press the government to get 'a guarantee from the US administration that the radar defence system be incorporated under the NATO operation and command in the future,' deputy prime minister for the Greens Martin Bursik told Czech TV. Their request was accepted.
While the senior coalition Civic Democratic Party and the junior Christian Democrats support the US radar base in the Czech Republic without such a condition, the senior opposition Social Democrats said they may change their negative stance on the radar if such a condition were met. 
Approval of both chambers of parliament and of the president is required for the US radar base to be placed on Czech soil. 
The social democratic and communist parliamentary opposition which controls exactly a half of mandates in a 200-strong lower chamber has opposed the US radar base's placement on Czech soil so far. They have been seeking a referendum on the issue. But the Czech opposition leader, Jiri Paroubek of the centre-left Social Democrats, is backing away from referendum calls after being leaned on, say sources, by the Americans in Prague. 
According to press reports, Defence Minister Vlasta Parkanova expects the vote to take place in a year. President Vaclav Klaus expressed his support for the base in an interview with the Hospodarske noviny daily, February 9th. 

Russia's outcry convinces the Czech FM of the opposite
The planned US missile base installations in the Czech Republic and Poland have been fiercely criticized by Russia. Russian President Vladimir Putin attacked NATO's enlargement into former parts of the Soviet bloc and criticized US plans to establish anti-ballistic missile systems in Europe in his speech at a security conference in Munich on February 9th. 
Czech Foreign Minister Karel Schwarzenberg said Putin's strident tone had showed why NATO enlargement had been necessary. 'He clearly and convincingly argued why NATO should be enlarged. And he presented a very convincing argument,' Schwarzenberg said. 

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AUTOMOBILES

Record number of Skoda Auto cars produced in 2006

Czech car maker, Skoda Auto, produced a record 556,443 cars in its Czech plants in 2006, a growth of 12.5 per cent from 2005, a statement from the company said, website praguemonitor.com reported. 
This year, Skoda plans to make 580,000 units and launch licence production in China. Skoda Auto sold 549,667 units last year, also a record number. Octavia sold 270,274 units and Fabia, previously the best-selling model, 243,982 units. The company also sold 20,989 Superbs and 14,422 Roomsters which arrived on the market in June. 
Sales in over 90 markets abroad grew by 11.7 per cent on the year. Skoda Auto's sales grew faster than the market as a whole and the company managed to consolidate its position in the European markets as also taking advantage of the growth potential in Asian markets, according to Detlef Wittig, Skoda Auto board of directors chairman. Skoda sold 301,343 cars in Western Europe, a growth of 9.1 per cent. The biggest markets were Germany, Great Britain, Spain and Austria. Skoda Auto remained the market leader in the Czech Republic, where it sold 37,388 Fabias, 21,233 Octavias, 2,406 Roomsters and 1,835 Superbs. The three best-selling cars on the Czech market were all Skodas in the last quarter of 2006. Skoda sold 146,612 units elsewhere in Central and Eastern Europe. It remained the market leader in Poland, Slovakia, Bulgaria, Lithuania, and Bosnia and Herzegovina. Its cars also sell well in Estonia, Latvia, Russia, Ukraine and Kazakstan where Skodas have been assembled locally since late 2005. Skoda Auto sold 36,541 units in Asia and overseas. India, Turkey, Egypt, and Israel were its biggest buyers. 

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AVIATION

Production of ultralight aircraft reaches all time high

Czech-produced ultralight aircraft reached an all time high last year, according to figures published by the daily Hospodarske noviny's January 15th edition, website praguemonitor.com reported. 
According to the paper, Czech companies produced 588 ultralight aircraft worth over a billion Czech crowns in 2006, 170 units more than four years ago, taking the company among the leading producers of ultralights in Europe. This year, output of this type of aircraft is expected to grow further, according to the Association of Sports Aircraft Producers. The Czech Republic, Germany, France, and Italy are Europe's biggest producers of ultralights, or aircraft with maximum take-off weight of 450 kilogrammes for Europe and 600 kilogrammes for the US. The Czech producers are particularly successful in the US. Out of the 560 aircraft of this category registered in the US in December, 390 were made in the EU, of which nearly 200 in the Czech Republic, it was reported. The US Federal Aviation Administration FAA expects that about 1,000 ultralights will be sold annually in the US in the next 10 years. President of the Czech Association of Sports Aircraft Producers Miroslav Kabrt said that the Czech Republic's production of ultralight aircraft could rise by 20 percent this year. Turnover of the roughly 25 small-and medium-sized Czech companies involved in the production of ultralights is expected to reach 1.25 billion crowns this year, HN wrote.

First order of Airbus arrives

The Czech Republic recently took delivery of the first of the two Airbus Corporate Jetliners (ACJs) that it ordered, becoming a new Airbus operator and "highlighting the aircraft's appeal to governments throughout the world," a statement from the European maker of the aircraft said, website luchtzak.be reported. 
With seating for almost 100 passengers, plus a VIP kit that can be fitted at short notice, the Czech Repulic ACJs would have a dual role - transporting troops in day-to-day operations and serving as a VIP transport when needed, the statement said. The Czech ACJ is powered by CFM International CFM56-5 engines. "The Airbus ACJ Family's versatility means that the Czech government is effectively getting two aircraft in one, which, together with its modern fuel-efficient design, is an enormously effective solution to its transport needs," Airbus Chief Operating Officer John Leahy said in the statement. Airbus' Corporate Jetliner Family, which comprises the A318 Elite, ACJ and A320 Prestige, is increasingly the preferred choice at the top end of the market, where they have won the most sales in each of the last three years - including almost two-thirds of the business in 2006. Total Airbus ACJ Family sales stand at around 80 aircraft. 

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ECONOMY

GDP to reach five percent in 2007

The Czech Finance Ministry now expects the country's economic growth to reach five per cent this year, up from the previous forecast of 4.9 per cent, website praguemonitor.com reported. 
In a statement published on January 31st, the ministry also revised its gross domestic product (GDP) growth projection for 2006, lowering it to 5.9 per cent from six per cent. In 2005, Czech GDP rose by 6.1 per cent. The data for 2006 will be released by the Czech Statistical Office on March 9th. 
The Czech National Bank on January 25 cut its GDP growth estimate for this year to 4.4 to 6.2 per cent, and predicts it at 3.1 to 6.5 per cent for 2008. The CNB in October estimated last year's GDP growth at 5.8 to 6.6 per cent. The OECD in its regular six-month outlook published in November forecast Czech GDP growth at 4.8 per cent for this year and at 4.6 per cent next year. The OECD said the Czech economy is driven particularly by exports, boosted by foreign direct investments. The organisation estimated Czech GDP growth in 2006 at 6.2 per cent.
The current GDP growth is pulled by gross capital formation. The influence of household consumption is growing, while that of foreign trade is decreasing in spite of the fast growth of exports, according to the Czech Finance Ministry. Household consumption would rise by 4.5 per cent this year, according to the financial ministry forecast. The previous estimate was 4.2 per cent. The estimate of household consumption growth for 2006 has been revised to 4.1 per cent from 3.9 per cent. Price growth is expected to remain slow, and the ministry revised its forecast of inflation for this year to 2.4 per cent from three per cent. 
Unemployment is predicted at 6.7 per cent this year, and this forecast has remained unchanged. The current account deficit ratio to GDP is estimated at 3.5 per cent, up from the previous estimate of 2.4 per cent. The state budget for 2007 takes account of exceeding of the previously agreed limits for spending. 

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ENERGY

Unipetrol sells Kaucuk to Poland's Dwory 

Czech oil and chemicals group Unipetrol announced on January 30 the disposal of its unit Kaucuk to Polish chemical company Dwory for 5.5 billion Czech crowns (195 million Euro), website praguemonitor.com reported. 
Dwory offered the highest price in a tender. It is a long-term strategy of Unipetrol to focus on refineries, petrochemical industry and a filling stations network, and, therefore, it started to sell units active in other spheres of interest, it was reported. Analysts had expected a lower price on average. Unipetrol netted 2.91 billion Czech crowns in January-September last year, up by 27 per cent on the year. PKN Orlen of Poland owns 63 per cent of Unipetrol, and Dwory is a strategic partner of PKN Orlen. Twenty-six investors were bidding for Kaucuk early last year. Dwory offered 4.1 billion crowns in the first stage of the tender. Unipetrol sales were eight percent higher at 71.81 billion crowns at the end of September. Kaucuk saw its net profit more than double to 514.2 million crowns. Its turnover amounted to 8.6 billion crowns, up by 618 million on the year. Unipetrol shares reacted with a growth, and closed 1.79 per cent higher at 238.3 crowns on the Prague bourse BCPP.

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FOOD & DRINK

Fruit harvest up 16 per cent to 191,000 tonnes in 2006

Czech fruit harvest in intensive orchards rose by 16 per cent to 190,955 tonnes last year, Fruit Growers Association Secretary, Martin Ludvik said on a conference call on January 16th, website praguemonitor.com reported. 
The growth was high compared with the harvest in 2005, which was exceptionally low because of spring frosts that damaged blossoms. Compared with other years, last year's harvest was average, Ludvik was cited as saying. Last year's year-on-year growth was mainly due to an upswing in apple harvest which added 15 per cent to 159,171 tonnes. Sour cherry harvest rose by 38 per cent to 10,955 tonnes, while cherry harvest was 127 percent up at 2,244 tonnes after a drop the previous year. In contrast, gooseberry harvest fell to eight tonnes from 32 tonnes in 2005. Fruit orchards cover an area of 17,086 hectares in the Czech Republic, with apple trees making up 9,033 hectares, it was reported. The financial value of fruit harvested in Czech orchards exceeds one billion Czech crowns every year. 

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INTEREST RATES

Interest rates unchanged by central bank

Modest inflation and a strong national currency helped the Czech central bank leave its benchmark interest rate unchanged on January 25 at 2.5 per cent, Deutsche Presse-Agentur (dpa) reported. 
The bank's decision was in line with analysts' forecasts with the recent surge in the Czech crown helping to keep the lid on inflationary pressures in the country, which was one of ten largely Central European states that signed up to the European Union in May 2004. 
The move by the national bank in the Czech Republic followed the release earlier in January of official data showing inflation in the country coming in at 2.5 per cent in 2006. This followed the acceleration in annual inflation in December to 1.7 per cent compared to 1.5 per cent in November.

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