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Czech report Czech report
by Euro Reporter
2011-11-21 07:13:35
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Central bank should be ready to react to crisis

The Czech central bank should be ready to react to “downside risks” to the economic outlook as the euro-area’s sovereign-debt crisis hurts growth prospects, the Organization for Economic Cooperation and Development said. The Prague-based Czech central bank has left the main rate at a record-low 0.75 percent since May 2010 as inflation remained near its 2 percent target. Earlier this year the bank debated when to raise rates, before changing on Nov. 3 its base- line forecast to a decline in borrowing costs by the end of the year. Governor Miroslav Singer said the next rate move may be in any direction.

The economic outlook has worsened as the crisis in the euro area damps demand in the country’s main market for exports. Gross domestic product will rise 2.1 percent this year and slow to 1.6 percent in 2012, according to forecasts in the OECD report published today. Both growth forecasts are higher than the central bank’s estimates.

“At the current juncture, monetary policy should be ready to react as downside risks for the economic outlook stemming from economic conditions in the euro area materialize,” the OECD said in its Economic Survey. “In this context, it’s welcome that the Czech National Bank has expressed preparedness to move its interest rates in either direction.” The central bank’s latest outlook, released Nov. 3, sees the inflation rate rising to 2.8 percent in the fourth quarter of next year mainly because of an increase in the lower bracket of the value-added tax from January. Monetary-policy inflation will move “lightly under the inflation target” of 2 percent through the first quarter of 2013, the forecast said.


Protests against austerity plans

Thousands of Czechs rallied in Prague on Thursday to protest against the austerity-minded government and express bitterness with developments in the central European country since the fall of communism exactly 22 years ago. Tired of graft and sleaze in top politics and angry with government budget cuts, more than 2,000 Czechs gathered on Wenceslas Square in the heart of Prague on a day marking the anniversary of the Velvet Revolution which overthrew the rule of communism in 1989.

The protests were attended by supporters of a number of small far-left initiatives, labour unionists, as well as top leaders of the largest Czech opposition party the leftist Social Democrats, which presently enjoy the largest public support, according to polls. Some carried Soviet flags with sickle and hammer; others held flags with a picture of Latin American revolutionary Che Guevara and banners with slogans including: "The 17th of November 1989 was a big con and a betrayal of the people of Czechoslovakia."

"I am against a right-wing dictatorship rule which we have here in this country," said 41-year-old Oldrich Kalous, a shop assistant from Pisek, a town south of Prague. "I want this mafia-linked government to get out of and have a new election which will bring socially sensitive reforms, like they have in Norway or Sweden," he said. The centre-right government of Petr Necas has become unpopular amid media disclosures of graft scandals and a retrenchment drive aimed at balancing budgets by 2016. The austerity has won the Czechs praise from investors and rating agencies and has helped cut government debt costs significantly as bond yields sank to record lows earlier this year. But it comes as the export-reliant economy is set to slow and possibly even shrink on waning demand for the country's industrial goods in key export markets of the euro zone. The slowdown will mean a smaller-than-expected income in the state coffers which will result in additional budget cuts and tax hikes and further suffocate domestic demand which is already very weak.


Students criticise underfunded universities

Czech student associations criticise the lack of funds for universities and their inability to administer the money, the Czech Student Union (CSU) said Wednesday, referring to the results of a poll it has conducted. If tuition were introduced, it should not exceed 5,000 crowns per semester, CSU Chairman Jiri Kohout said. The poll that involved 60 respondents has also revealed that students are dissatisfied with the quality of universities and expect it to continue falling.

"Students are ready to pay tuition but when seeing that state coffers lose billions of crowns over various corruption scandals, they naturally ask why they should pay for the losses with the tuition," Kohout said. Kohout said 75 percent of participants in the poll were of the view that the introduction of tuition alone would not help resolve the problems of Czech universities. Tuition has been rejected by the Council of Universities.

Along with lack of money, poor quality of teaching and poor support to research and science, the students denoted a lacking concept and inability of the Education Ministry as the most serious problems of the Czech university sector. The centre-right government recently agreed that the tuition fees should start to be paid as from 2013, with the maximum fee of 10,000 crowns per semester. The schools would receive the sum from the state immediately, while the graduates would repay it after achieving an above-average pay. The tuition may be lifted for students of strategic branches such as technical ones.

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