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Business Prague Journal - Article Last updated: 4th Sep 2003, 9:10 Banking & Finance Energy Gov't & Politics Industry & Trade IT & Telecom Communications Real Estate Agriculture Business Life This week's PBJ Enter keyword(s): Advanced Search Feature Q&A Political Economy Reality Czech Letter to the Editor Opinion Who's news Week in review Markets Week Inside the list Executive Living Time Well Spent This week's columns Movie Guide Restaurant Guide Calendar City Invest Czech Conference Calendar Internet Marketplace PBJ Events Newsletters Archives Advanced Search Export-Import Center FREE Registration PBJ Subscribe PBJ Store Affiliates Do Business With Us LOG IN FAQ About Us Feedback Advertise Staff List PBJ HomeBanking & FinanceFalling crown adds heat to reform ... 4th Sep 2003, 23:48 Banking & Finance Weak crown There is less certainty about what Hojdar has up his sleeve, Mitrofanov said. The daily Mlada Fronta Dnes reported last week that he had compiled a list of 12 proposed changes to the reforms. Precise details were not available, but Hojdar said that on taxing the wealthy and changing the sick leave system his objections were similar to those of the unions. Hojdar met with Sobotka Friday and presented his proposals, Ministry of Finance spokesman Jaroslav Dedic said. The proposals would be studied, but if they involved any spending increases they would not be accepted, Dedic said. "I'm not really convinced [Hojdar] knows what he's doing," Mitrofanov said. "Even he must be aware that his demands are too strong. He doesn't want the government to collapse, so he'll have to compromise." Hojdar wasn't answering his mobile phone last week. Compromise is possible only on minor points, Mitrofanov added, and would help the unions save face. But the reforms should remain mostly untouched, he said. Economists and analysts were less confident the government could get the reforms through Parliament. If it fails and collapses, concerns about political instability would weaken the crown. "It is already weakening and will continue to do so until the vote in late September," said Kamil Janacek, chief economist at Komercni Banka. "If the government collapses there'll be several months of instability a until new government is formed or Parliament approves early elections. This would further weaken the crown." The crown reached a 19-month low of Kc 32.57 against the euro last Wednesday. While good news for exporters, it could hit imports and lead to price increases. Failure would also leave public expenditures escalating unchecked until a new government took over. While lower than in most European countries, Czech public debt reached 27.2 percent of GDP at the end of 2002 and was expected to reach 30.5 percent by the end of 2003. Even if the government's reforms succeed, it should reach 38.4 percent by 2006 (48.2 percent without reforms). To cover the growing deficit, the government keeps issuing more bonds. But on July 9, less than 50 percent of a Kc 14 billion 5-year bond issue was subscribed. Analysts ascribed the lack of interest to the low yields offered by the government. "Successive Czech governments have been lucky in getting away with low yields," said Jeff Gable, an analyst at Deutsche Bank in London. "They'll find that harder to do in the future." With more bonds around, he added, it has become a buyers' market. In order to arouse investor interest the government will have to raise yields, meaning servicing the country's debt will become more expensive. So, starved of demand at home, the Ministry of Finance has indicated euro bonds abroad may be on the cards, which economists have described as a smart move. "As there is a scarcity of Czech government euro bonds, they would likely be snapped up quickly," Gable said. Discuss this subject with other users Previous Page Prague Business Journal Weekly Headlines Regional Roundup 'Paying someone from taxes to have an erection seems to me immoral.' Psychiatrist and sexologist Ondrej Trojan on the results of a survey by a leading Czech porn site that showed state officials are among the biggest visitors to its pages during normal working hours. BBJ | PBJ | CEEBIZ | BOL | CEEProperty | Prague Insider 2003 New World Publishing Kft and New World Publishing, Inc. All rights reserved. Republication or re-dissemination of the contents of this screen are expressly prohibited without the prior written consent of New World Publishing.

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