The lower house of Czech parliament approved in the first reading the government's 2004 draft state budget on Wednesday. In the first reading, the chamber approved the total expenditures, revenues and deficit. In the second reading, MPs will have a chance to change the internal structure of the budget by shifting money among individual chapters. The 2004 budget is based on the government's strategy aimed at gradual reduction of fiscal gaps and euro adoption by the end of this decade. The budget deficit next year has been locked at 115 billion Czech crowns on expenditures of 754 billion.
Czech President Vaclav Klaus signed a law raising excise taxes on petrol, tobacco and alcohol as of January next year. The Finance Ministry expects the tax hike to bring about 12 billion crowns in extra revenues next year. The excise tax hike as well as an increase in VAT on many goods and services from 5 percent to 22 percent is part of government strategy to cut the widening fiscal gap to four percent of gross domestic product in 2006 from more than seven percent this year.
The Czech cabinet adopted a national strategy on Monday mapping out a cautious way to adopt the single European currency in 2009-2010 or later. The document, prepared jointly by the economic ministries and the central bank, advises the country to adopt the euro as soon as possible but takes a realistic view of when the Czech economy will be ready for the move. The largest obstacle on the road to the single currency is a large fiscal deficit. Other so-called Maastricht criteria include interest rates, inflation and exchange rates. Unlike Britain or Denmark, who have an opt-out from euro membership, the Czechs and the other nine EU candidates supposed to join in 2004 have committed themselves to eventual adoption of the single currency.
The Czech government is under fire from Brussels for preparing to sell coalmines in a way that apparently violates E.U. open-market rules. The government's tender proposal appears to be aimed at favouring a Czech company while preventing German and Austrian companies from bidding for the Severoceske Doly and Sokolovska Uhelna mining companies, the Prague Business Journal reported. The government opened the tender process this month and plans to sell its majority stakes in the profitable, brown-coal mining companies by the end of the year. The government could get over 200 million dollars for both firms. Critics claim the government's bidding conditions are "tailor made" for one Czech mining and engineering company, Appian Group. A European Commission official warned that violations of tender rules could lead to a loss of EU structural funds for the Czech Republic.
Meanwhile, the dominant Czech power utility, state-controlled CEZ, said it would bid for the government's stakes in the mining companies. CEZ, Europe's second biggest electricity exporter, said it wants to ensure that a 37 percent stake it already holds in Severoceske Doly does not lose value, which could happen if another majority owner were to come in. However, cabinet ministers said the government would use its shareholder power to kill the plan, because it is not in line with the state's idea about CEZ's acquisition policy, the main issue being linking energy production with brown coal mining so closely.
Czech retail sales growth slowed to 5.8 percent year-on-year in August after rising by 7.2 percent in July, due mainly to lower sales in non-grocery shops. Analysts had, on average, predicted a 7.2-percent rise. Retail spending rose a real 0.8 percent in August from July in seasonally adjusted terms thanks to an ongoing recovery in sales and repairs of cars.
For the first time in eighteen months, prices of industrial products and services in the Czech Republic were unchanged in year-on-year terms in September. The Czech Statistics Office said that prices of food, alcoholic beverages, tobacco, oil and refinery products and metal products rose, while prices of textiles and pulp and paper products fell, compensating for the rises. In a monthly comparison, producer prices, as measured by the Producer Price Index (PPI), were up 0.4 per cent in September. The statistics office said higher prices of oil product and meat pushed PPI up on the monthly basis.
The Czech Foreign Ministry said it would soon publish information on its website to help Czech businesses find contracts in Iraq and join in the renewal of the country. Czech businesses reportedly have the biggest chance of getting contracts in water management and power generation.
Czech milk producers demand that farmers price of milk in the Czech Republic grow to the level common in the current European Union countries. In a joint statement, farmers said milk prices in the Czech Republic have been falling since 2002 to 7.60 CZK per litre, while the price in the European Union is higher than 8.50 CZK. Cattle breeders see a chance to push their demands through cooperatives and encourage farmers to work together. At the same time, breeders also want beef prices to grow from the current 38 to 45 crowns per kilogram.
Japanese concern Daikin Industries has launched construction of a new plant in the Borska pole industrial zone near Pilsen, West Bohemia. The company plans to invest around 30 million USD by the end of 2006 and employ 500-700 people within three years. The company, which controls a third of the world's air-conditioning market, is planning a further expansion in Pilsen, investing more than 60 million USD by 2010.