The temperature's rising
The CR's political risk went up a notch on Friday.
President Václav Klaus vetoed an increase in VAT on
some items, and the crown weakened to a recent low of
Kè 32.08/euro. Klaus justified his move on mainly
economic grounds, but coalition politicians and
commentators say it was pure partisan politics. Klaus'
veto plays into the hands of ODS, which at some point
would like to bring down the cabinet. The crown might
continue to weaken over the summer, but otherwise the
short-term effect of the veto won't likely be great. CEO
Martin Jahn of CzechInvest said that foreign investors
have come to love the CR because they can get their
production plants up and running very quickly.
Bickering among politicians won't change this.
However, if market sentiment shifts and real doubts
emerge about budget reform, investors might think
twice before signing a deal. public-finance
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