Final Word from Wednesday, February 2, 2011



Over the past five years, the city of Prague has run budget deficits of between Kč7.4bn and Kč 10.0bn (based on projected, not actual, figures). Average revenue in2006-2010 was Kč 37.1bn, and the average deficit was Kč 8.9bn. This year's budget isalmost exactly the same (projected revenue of Kč 37.4bn and a deficit of Kč 9.0bn). Asa percentage of revenue, the 2011 deficit is a staggering 24.1%. For every four crownsraised, another will be borrowed. By this measure, the Prague budget is far worseoff than the Czech national budget, where the approved 2011 deficit is "only" 13.0%of revenue (in the U.S., the figure is nearly 60%). Before the Prague deficit erupts intoa PR problem, the city's spin doctors need to discover the magic of GDP. The deficitmight be 24.1% of revenue, but as a percentage of Prague's Kč 950bn annual GDP, it'sonly 1%. Meaning that Prague is actually underleveraged and should borrow more.

Glossary of difficult words

deceptive - giving an appearance or impression different from the true one; misleading;

projected figures - meaning that these are the figures that were approved by the city assembly, not the actual figures at the end of the year;

staggering - astonishing or deeply shocking;

revenue raised - meaning in this sense money raised from taxes or other similar sources;

to erupt - to explode with fire and noise;

spin doctor - a spokesperson or media adviser employed to give a favorable interpretation of events to the media;

underleveraged - having insufficient debt in one's capital structure.

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Ovenecká 78/33
170 00 Prague 7
Czech Republic

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