The Prague Post Online: Business: ČR lags behind in EU market rules

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December 1st, 2008

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ČR lags behind in EU market rules

Commissioner warns delays could create legal confusion

By Riva Froymovich
Staff Writer, The Prague Post
July 18th, 2007 issue

Officials insist the government is not dragging its feet on putting European Union market rules in place, even though the country was slapped on the wrist twice recently for failing to meet EU expectations.

A recent change in government is what caused the slowdown, said Lucie Šestáková, a spokeswoman for the Industry and Trade Ministry’s EU internal market department.

“There was a lack of executive power that is needed to push through necessary legislation” before the current government took office, Šestáková said.

The country ranked near the bottom of the EU Internal Market Scoreboard released July 2 for being slow to implement laws. The list is a snapshot comparison of 25 EU member states. The Czech Republic came in 21st.

“Given the Czech Republic’s relatively recent membership in the European Union, it is worrying to see it has already accumulated a 2.3 percent transposition deficit and that it is likely to increase this deficit further in the next six months,” said Charles McCreevy, European commissioner for the internal market and services.

Countries that don’t change their rules quickly enough could create legal confusion for companies and subpar service delivery, according to Oliver Drewes, spokesman for McCreevy.

“While we acknowledge there is room for improvement,” the Industry and Trade Ministry feels the EU has no evidence that the lag is likely to continue, Šestáková said.

The new government will implement all required legislation, she said. “The Czech Republic intentionally chose to implement [EU codes] in a way that maybe is a bit lengthier but of high quality,” she said.

“From this point of view, it is necessary to reject vehemently all the misleading interpretation about the Czech Republic employing some sort of sophisticated tactic that would allow it to profit from its passivity,” Šestáková said.

Minister without Portfolio Cyril Svoboda, head of the Czech Legislative Council, agreed that the long backlog of laws is a result of the government’s instability after inconclusive general elections in June 2006.

“It is a repercussion of a complicated and relatively long period when the Cabinet was changing and a new government was formed; now the process of implementing directives and the EU legislative regulations into Czech legislation is running and is speeding up,” said Svoboda through spokeswoman Simona Cingánková.

Nevertheless, the results were surprising to the EU.

“The new member states were top performers at the beginning because they were a new part of the EU and were doing an awful good job,” Drewes said. “There seems to be some attitude that it doesn’t seem to be so important anymore. But the internal market is a constant effort.”

EU officials hope to work out problems with the Czechs by December, Drewes said.

The delay in implementing laws compromises legislative transparency in the Czech system, which could result in high legal fees for companies already doing business in the country and fewer wanting to build headquarters, he said.

It might obscure anything from the reporting standards required of financial services firms to the value of a diploma or the quality of meat.

“Companies will not choose to do their business [here] and go somewhere else,” Drewes said.

Currently, there are almost 30 infringement procedures launched against the country by the EU for failing to comply with EU expectations and standards, according to the Czech News Agency.

Sectors with the most violations are environment, tax and customs union, and energy and transport, which account for almost half of all cases, according to the Finance Ministry.

In addition, the European Council last week issued a disciplinary statement to the Czech Republic for failing to comply with its recommended steps to decrease the government deficit. The announcement came amid rising public criticism over the government’s proposed finance reform package — which is supposed to answer the EU’s deficit complaint.

“We are aware of this threat and we are going to take all necessary measures in order to improve the fiscal position of the Czech Republic,” said Jakub Haas, a Finance Ministry spokesman.

The reform package is expected to be discussed in the Chamber of Deputies in August, he said.

The government projected a deficit level of 4.0 percent of gross domestic product for this year, 3.5 percent for 2008 and 3.2 percent for 2009. The EU’s maximum threshold goal is 3 percent of gross domestic product.

Finance Minister Miroslav Kalousek said last week that the EU supports the finance reforms proposed by the government as a step toward lowering the deficit and adopting the euro. If the reform package is approved by Parliament next month, his draft of the 2008 state budget will have a deficit that does not exceed 3 percent of gross domestic product, he said.

Riva Froymovich can be reached at rfroymovich@praguepost.com

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