Republican Reference - Area ( 78,867 - Population 10,190,213 - Capital Prague - Currency Koruna - President Vaclav Klaus - Private sector % of GDP 80%

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Books on Czech Republic

Key Economic Data 
  2009 2008 2007 Ranking(2009)
Millions of US $ 190,274 215,499 174,214 41
GNI per capita
 US $ 17,310 16,650 14,380 58
Ranking is given out of 213 nations - (data from the World Bank)


Following the First World War, the closely related Czechs and Slovaks of the former Austro-Hungarian Empire merged to form Czechoslovakia. During the interwar years, the new country's leaders were frequently preoccupied with meeting the demands of other ethnic minorities within the republic, most notably the Sudeten Germans and the Ruthenians (Ukrainians). After World War II, a truncated Czechoslovakia fell within the Soviet sphere of influence. In 1968, an invasion by Warsaw Pact troops ended the efforts of the country's leaders to liberalize Communist party rule and create "socialism with a human face." Anti-Soviet demonstrations the following year ushered in a period of harsh repression. With the collapse of Soviet authority in 1989, Czechoslovakia regained its freedom through a peaceful "Velvet Revolution." On 1 January 1993, the country underwent a "velvet divorce" into its two national components, the Czech Republic and Slovakia. The Czech Republic joined NATO in 1999 and the European Union in 2004. 

Update No: 126 - (26/11/07)

The Czech and Slovakian leaders joust on TV
The Czech Prime Minister Mirek Topolanek appeared along with Slovakia's Prime Minister Robert Fico in a duel on the regular programme "Vaclav Moravec's Questions" of the public broadcaster Czech Television (CT) on November 18. 

Topolanek had beforehand arrived in Slovakia on November 16 to attend an opposition rally commemorating the 18th anniversary of the 1989 "Velvet Revolution," a spokesperson for the Czech PM said.

The rally at the Namestie SNP square, Bratislava, devoted to the anniversary of the fall of the Communist regime in 1989, was organised by leaders of three Slovak opposition parties, the Slovak Democratic and Christian Union-Democratic Party (SDKU-DS), the Christian Democrats (KDH) and the Hungarian Coalition Party (SMK). Along with the three parties' leaders, Mikulas Dzurinda, Pavol Hrusovsky and Pal Csaky, Topolanek lighted up candles.

The Slovak rally saw a number of dissidents, actors and rock groups attend, The participants attached a tricolour to their clothes and lit up candles as a sign of respect to the struggle for freedom and democracy, as they had done in 1989.

Then on Sunday, November 18 Topolanek and Fico appeared in the CT debate broadcast from Brno, South Moravia. Neither side was really wanting to mar good relations and the debate was restrained. After all in the Velvet Revolution in 1989 they were on the same side of the barricades. 

German-Russian energy moves alarm the Czech PM
The Czech Republic is concerned by close energy ties between Germany and Russia because they may threaten Czech energy security, PM Topolanek said on November 20. Topolanek, a right-wing prime minister who took office last year, said the country was developing diplomatic activity and practical plans to diversify oil and gas supplies. "We have big concerns, and I talk about it very openly so I can say it here, from the kind of new big friendship between Berlin and Moscow," he told a business conference.

The Czech Republic takes about 80 percent of its gas and most of its crude oil from Russia, and Topolanek's centre-right cabinet has made energy security one of its priorities.
Relations between the pro-U.S. government and Russia have been strained since the Czechs began to contemplate a US request to build part of a U.S. missile defence shield in the country, earlier this year. The Czech Republic is hostile to the whole idea, which it sees as directed against the Russians, not rogue regimes the other side of Eurasia. Geography would appear to bear them out.

But Toplanek and President Vaclav Klaus are out-and-out Atlanticists and both markedly reserved about Russia, whom they well remember as oppressors of their country before 1989.

Russia and Germany are planning a 1,200 km (745.6 miles) pipeline under the Baltic Sea, called Nord Stream, that will take 55 billion cubic metres (bcm) of gas a year directly from Russia to Germany.

Russian gas monopoly Gazprom wants to diversify export routes away from intermediate countries such as Ukraine, Poland, Belarus, the Czech Republic and Slovakia, while Germany wants to feed its expected rise in demand for gas.

"It means in the horizon of about 15 years a total bypassing in terms of oil and gas, a change from a transit country to a target country with all the associated risks," Topolanek said.
"This is not only a question of Nord Stream, but also of oil. There is a significant reduction of the Druzhba pipeline in the strategic plans of the Russian Federation, in the end the operation may be stopped altogether," he said. The Druzhba takes crude oil via two branches from Russia to Belarus, Ukraine, Slovakia, the Czech Republic, Poland and Germany.

But Russia plans to build a new oil link to a terminal on the Baltic coast, which would bypass the central European transit and target countries.Topolanek said the Russian plans would lead to significant investments in diversification, but gave no details.The Czechs already take oil via the IKL pipeline from Germany and gas from Norway. 

PM against early adoption of the Euro
Topolanek is rather reserved about the EU, as even more so is Klaus. This is the flip side of their Atlanticism. The PM has reiterated warnings that the Czech Republic should be in no rush to adopt the Euro, the latest in a series of signals from 'outsider' central European economies that their governments are cautious about the idea and are again pushing back their timetables for joining the single currency.

Topolanek, whose government came in after winning elections last year, has made no secret of its Euro scepticism. He said that for the Czech Republic to link its currency to the Euro could bring with it further inflationary pressure, notably by cooling gains for the crown that have offset rising world energy costs. "Adopting the Euro would eliminate one of the advantages of the Czech economy, which is the appreciating crown to the Euro...,that has a certain control over rising fuel prices,' Topolanek said in a speech at a business round-table in Prague. 

Unlike Sweden and the UK, former communist Poland, Hungary and the Czech Republic have no opt-out clause on joining the single currency, a commitment that was part of the terms of their accession to the EU in 2004. This is back-firing on the Euroland-enthusiasts.

All of them have been steadily pushing back the timing of when they will try to join and analysts now expect Warsaw and Prague not to bid for entry to the zone before 2013 and possibly nearer 2016. The new government in Poland, under the pro-EU premier Donald Tusk, is not expected to change course here. 

As for the Czech Republic, Topolanek's Civic Democrat government earlier this year quietly abandoned the 2012 target set by the previous government, mainly due to high budget deficits and a lack of reforms that would secure the long-term sustainability of public finances.

The opposition Social Democrats, however, still believe the country could meet a 2012 date, and are still pushing the government to set a target date. 'We are convinced that if the government discussed it like it should and decided to ... enter the exchange rate mechanism ERM II in 2009, it could manage entry to the euro zone in 2012,' the party's deputy chairman Bohuslav Sobotka told a press conference.

The country's largest exporters have also recently become more vocal in pushing for swifter euro adoption, arguing their competitiveness is being hurt by the strengthening crown, which has gained about 7 % since July and is near record levels to the dollar and euro.

However, Topolanek said the appreciation of the Czech crown is healthy as it is backed by real economic growth, and added that putting the crown into the pre-euro ERM II currency grid could curb the ability of the strong currency to mitigate high prices of fuels.

Countries planning to adopt the euro must peg their currency to the euro in the ERM II exchange-rate mechanism for two years before joining. 'If we fixed the crown to the euro in the ERM II system, then this advantage would disappear,' Topolanek said.

Prague has worked hard to reign in spending, passing a 2008 state budget that aims to cut the deficit to 2.95 % of gross domestic product (GDP) in 2008, or below the 3 % ceiling set in the Maastricht treaty. In 2009 the deficit should drop to 2.6 % and in 2010 it is expected to be 2.3 %, according to government proposals.

However, Czech finance minister Miroslav Kalousek has said that in the long term, the country will not be able to keep the public finance deficit below 3% of GDP, until it completes pension and public health system reforms which are only now getting under way.


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