Final Word from Monday, July 21, 2003

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 Kč 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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