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Czech business confidence picked up in February after a three-month decline. The Czech foreign trade balance showed its best monthly result since 1995 with a deficit of 0.2 billion crowns. The Czech Republic will ask Brussels fight for a lower VAT for restaurants. The former monopoly Czech fixed-line operator Cesky Telecom has lost tens of thousand of clients in 2003.

The Czech Republic is getting ready for billions of euros from EU structural funds after enlargement on May 1. However, things do not seem so bright due to reportedly insufficient financial control at the regional and municipal level.

30 percent of Czech exporters seen not ready for EU competition. Boeing to leave Aero without compensation. Czech January producer prices jump more than expected. Retail sales in December grow 6.3 percent year-on-year. Industrial output rises by 8.9 percent in December.

The Czech government has decided to act to save the troubled aircraft maker Aero Vodochody, controlled by American Boeing, restructure the company and find a new strategic partner for it. However, the plan is not without a catch: although the government holds a majority in Aero, Boeign has a managerial control and the government cannot terminate their agreement unilaterally.

Inflation accelerates beyond expectations to its fastest rate in nearly two years. The unemployment rate rises to a record 10.8 percent but many are reluctant to take available jobs. Labour and Social Affairs Minister is planning to tighten the conditions for foreigners who want to obtain a business licence. Czech construction firms are merging so as to have easier access to large contracts financed from European Union funds.

The government has agreed on the main aims of the pension system reform, although on a very general level. The new system should be more efficient, equitable and financially sustainable. It should react to the changing needs of the society and individuals, increase savings rate and guarantee future pensioners a sufficient income.

European policy makers told EU accession states not to hurry with entering the exchange rate mechanism, a step required before euro adoption. The government has agreed to reduce the basic Value Added Tax rate from 22 to 19 percent. Central Bank has left interest rates intact for the time being but signalled hikes on the way.

Coalition parties at odds over another tax hike. The railway trade unions are planning a strike in protest at mass redundancies. Stock brokers from the European Union are becoming interested in membership of the Prague Stock Exchange. Czech truck production decreased in 2003. The tractor maker Zetor is on the verge of bankruptcy. OKD mulls acquisition of Polish competitors. Czech travel agents report record sales for 2003. Number of importers from China may go out of business for failing to apply in time for a licence. Russian industrial group

Czech producer prices have grown again in December. The government is likely to ask coal mine bidders to increase offers. Czech officials put pressure on Boeing over Aero's problems. Czech Airlines open new Prague air cargo terminal. Cabinet shortlists three bidders in Unipetrol privatisation. The Czech Republic has asked the World Bank and the European Bank for Reconstruction and Development to help it upgrade the bankruptcy law.

Welcome to another edition of Economics Report. The unemployment rate has reached a record high and analysts predict that the worst is yet to come. More on that in a moment, but first, here is a review of the latest news.