Books on Czech Republic
% of GDP
Update No: 095 - (01/04/05)
There is a serious political crisis in the Czech Republic,
which came to a head at the end of March. The three-way coalition ruling the
country, but with only a one-seat majority in parliament, has been heading for
collapse since February 19th when questions surrounding the financing of the
family property of Prime Minister Stanislav Gross prompted KDU- CSL, the second
party in the coalition, to call on the Social Democratic Party to replace Gross.
But Gross has said that he will fire KDU-CSL's three cabinet ministers and lead
a minority cabinet with ad-hoc support in parliament. Gross has been premier
since 26th July 2004. His deputy premiers since 4th August 2004 have been Zdenek
Skromach, Martin Jahn, Pavel Nemec, and Milan Simonovsky.
Gross was popular before the scandal broke and may yet survive it.
No. 2 Ruling Party reiterates premier must quit
The head of the Czech Republic's second- largest ruling coalition party, KDU-CSL,
however, has insisted that Gross must resign and has rejected the premier's
demands that his party's ministers quit the cabinet. The KDU-CSL said it lost
patience after Gross announced February 13th that his wife financed a 5.9
million-koruna (US$260,000) house purchase with a loan collateralised by the
property of a friend who has been charged with fraud and in whose house in
Prague there is a brothel. Miroslav Kalousek, chairman of the Christian
Democratic Union- Czechoslovak People's Party, or KDU-CSL, said after meeting
President Vaclav Klaus today in Prague that ''Gross's connection to income
stemming from doubtful businesses'' is unacceptable. ''I informed the president
that we still are willing to remain in the coalition, which we consider'' be
capable of functioning, Kalousek said. ''Gross's problem won't be solved by
Christian Democratic ministers abandoning the government.''
The three ruling parties are to hold further negotiations to see whether the
rift can be settled.
Late March crisis-point
On March 29th, however, it looked as if the government was on the brink of
collapse. The Social Democratic Party said that it would not yield to demands
for the replacement of Prime Minister Gross with another candidate from within
its own ranks.
The Christian Democrats had said they would strongly consider pulling out of the
three-party coalition, which also includes the neo-liberal Freedom Union, unless
the Social Democrats remove Gross from his post.
If the Christian Democrats leave the government it will lose its parliamentary
majority and would need votes from Communist Party members of Parliament to stay
President Klaus plays the role of mediator
Klaus at a press conference in Prague called on both political leaders to come
up with new proposals on how to resolve the quarrel. He declined to answer any
questions from journalists.
''I could see a will to resolve this problem; however, I unfortunately can't see
an easy and satisfying way'' out of the political crisis, ''whose momentum is
getting dangerous,'' Klaus said. ''I asked the party leaders to come with
something that would lead off this dead-end path'' and ''convince people that a
functioning government is possible.''
Comeback of the Communists?
If the KDU-CSL leaves the government, the opposition Communist Party, with 41
seats in the 200-member parliament, will be crucial for Gross's minority
cabinet. The Communists, who have been shunned by other parties since the 1989
collapse of their totalitarian regime, will be able either to support it or help
topple the minority government.
The KDU-CSL and the Civic Democratic Party, the nation's main opposition party
and the favourite to win mid-2006 elections, would need the Communists to
express no confidence to Gross's minority government and pass a constitutional
law that would shorten the government term and pave the way to early elections.
The Communists' leadership are to meet in Prague to discuss further steps, said
party Chairman Miroslav Grebenicek. He indicated in a debate on public
television that the party would prefer backing Gross's cabinet to early
''This government doesn't enjoy our confidence and unless it changes its
program, we don't see any reason to support it,'' Grebenicek said on public TV.
''The early election is one of possible solutions but we prefer the current
government to bringing the reign of ODS closer.''
Recently, the KDU-CSL joined the main opposition party and the Civic Democratic
Party in criticizing Gross for failing to fully explain the origin of money he
received to purchase an apartment in Prague in 1999.
CSL on the selling table
Ceska sprava letist (CSL), the administrator of Prague's Ruzyne international
airport, may be privatised by 2006, the Czech Finance Ministry said, Interfax
News Agency reported.
CSL would first be transformed into a joint stock company, probably this year,
Finance Minister Bohuslav Sobotka said. The sale of CSL shares on the Prague
Stock Exchange (BCPP) is one method under consideration, according to Sobotka.
The final decision on the method of privatisation will be the government's. The
state holds 100% of CSL. Experts estimate its value at 17bn Czech crowns.
Sobotka did not say whether a majority stake would be privatised.
Czech Republic plans to issue Eurobond valued at 1bn Euro
The Czech Republic is planning to bring to market its second Eurobond deal, the
Wall Street Journal Europe reported recently.
The country named ABN Amro, Deutsche Bank AG and J.P.Morgan Chase & Co to
lead-manage an expected 15 year issue valued at 1bn Euro.
The deal is expected to launch in the fist half of the year, subject to market
conditions. The country is rated single-A-1 by Moody's Investors Service Inc and
single -A-minus by Standard and Poor's Corp.
Also in the pipeline is an issue by Caja de Ahorros Municipal de Burgos, which
hired ACF, Credit Agricole SA's Calyon unit and Santander Central Hispano SA to
lead the coming euro-denominated floating-rate note. The deal is rated A2 by
Recently, Dutch financial institution, Rabobank, tapped its September 2009 issue
for a further 400m, or some 580m Euro, through Barclays Capital and Royal Bank
of Scotland. The deal pays a 4.75% coupon and is priced at 99.49. It is rated
triple-A by both Moody's and S&P, and double-A-plus by Fitch Ratings.
KfW, the German government-guaranteed development agency, priced a 500m Euro,
30-year old bond through Deutsche Bank. The deal, rated triple-A by all three
major ratings companies, will be callable after the seventh year and offers
investors a 4.25% yield.
Linde Technoplyn profits swell
Linde Technoplyn, the largest Czech technical gas supplier, saw its 2004 net
profit increase 4 per cent year-on-year to 750m Czech crowns in 2004, according
to preliminary figures released by the firm, Interfax News Agency reported.
Sales were up at roughly the same pace to 4.05bn crowns. Supplies of equipment
producing technical gas at clients' facilities rose 20 per cent year-on-year.
Sales of liquid and bottled gas were also on the increase, said the firm.
Skoda Power launches India unit
Czech trading and engineering firm Skoda Power (SP), part of engineering group
Skoda Holding (SH), launched operation of a new company focusing on supplies,
upgrades and servicing of energy plants in Delhi, SH spokesman, Karel Samec,
said recently, New Europe reported.
The Skoda Power Pvt company is 100 per cent owned by SP. SP plans to invest 320m
Czech crowns in India over five years and employ about 50 people. If the initial
phase of the project proves successful, SP will invest several hundred million
crowns in production, Samec said.
T-Systems signs deal with T-Mobile
German IT services provider T-Systems has signed an information technology
outsourcing agreement with mobile operator T-Mobile Czech Republic, the firms
announced in a joint statement, Interfax News Agency reported.
Both T-Systems and T-Mobile are subsidiaries of Germany's telecom giant Deutsche
Telekom. The value of the seven-year deal is 100m Euro. Under the terms of the
contract, T-System will provide managed desktop services and IT infrastructure
to T-Mobile in the Czech Republic.
Cesky results give a fillip to sell-off
Cesky Telecom, the Czech former fixed-line monopoly, recently announced strong
profits for last year, reassuring bidders in the ongoing privatisation of the
state's 51 per cent stake, The Financial Times reported.
Cesky Telecom reported preliminary net profits of Kc5.6bn (US$242m) on sales up
21 per cent to Kc62.1bn, compared with a loss of Kc1.8bn in 2003 - caused by a
Kc10bn write-off of the value of its network. The ebitda margin was 47 per cent,
compared with 46 per cent the year before.
For the first time, mobile operator, Eurotel, was consolidated in the accounts
for the whole year following its acquisition in late 2003. Eurotel raised
revenues by 1 per cent to Kc29.5bn last year, while revenues from fixed lines
fell 6 per cent to Kc34.4bn because of greater competition and increased use of
A privatisation commission recommended on February 7th that the Czech government
sell Cesky Telecom to an investment group that teams up with one of three major
telecoms - Switzerland's Swisscom, Spain's Telefonica or Belgium's Belgacom.
The recommendation came after the commission announced that two investment
groups had submitted higher bids than the three telecoms in a five-way contest
for the government's 51% stake in Cesky Telecom, Deutsche Presse-Agentur (dpa)
quoted National Property Fund spokeswoman Petra Krainova as saying.
The confidential bids, which reportedly range between 50bn and 69bn Czech crowns
(US$2.17-3bn), were submitted 2 weeks ago.
Krainova declined to discuss the offers but said the highest bids were submitted
by the Czech-Slovak investment consortium PPF, J&T and InWay; and a
consortium led by the US-based Blackstone, CVC Capital Partners and Providence.
She said the commission that reviewed the bids Monday wants each consortium to
combine forces with one of the 3 telecoms before submitting a final bid.
The participation of "these two financial consortiums in the second phase
of privatisation process and the possibility to submit the binding offer would
be qualified only by a connection with an eminent telecommunication
operator," Krainova said in a press statement.
It was unclear whether which, if any, of the telecoms will agree to team up with
the investment groups.
PPF operates insurance and banking firms as one of the Czech Republic's largest
financial groups. Blackstone was in a consortium with Denmark's telecom TDC and
Deutsche Bank whose previous attempt to buy Cesky Telecom collapsed 2 years ago.
The privatisation commission, whose members include officials from key
government ministries, wanted the final bids to be submitted by March 29th.
Last month, government officials warned that Cesky Telecom would be sold through
a public stock offering unless a suitable buyer emerged before April. It is one
of several state-run companies that the Prague government hopes to sell this