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Economy expected to ride out crisis

Gov't urges restraint and tells investors to remain confident

By Markéta Hulpachová
Staff Writer, The Prague Post
October 8th, 2008 issue

As Europe struggles to form a joint consensus on a solution to the global financial crisis, the Czech government is promoting restraint and urging investors to retain their confidence in the local economy.
The economic heads of the 27 European Union member states met in Luxembourg Oct. 7 for an emergency summit to discuss the meltdown, which had in recent days caused substantial market share losses in the United Kingdom, France and Germany.
In an effort to prevent panic and protect their domestic economies, the governments of Ireland, Greece, Denmark, Germany and Austria issued separate declarations pledging state guarantees for afflicted banks.
Separately, Iceland’s prime minister, Geir Haarde, warned that the country faced bankruptcy, and the nation’s Parliament approved an emergency legislation to overhaul the banking system in response to a 30 percent to the euro drop by Iceland’s national currency, the krona.
As the EU scrambled to find a unified solution to a problem that had already drawn fragmented responses from its member states, Finance Minister Miroslav Kalousek said he preferred a laissez-faire approach to the domestic economy, emphasizing that Czech banks have not been impacted by the crisis and their clients are not panicking.
“European politicians have gone mad,” he told daily Hospodářské noviny at the Oct. 7 summit, adding that he regarded state guarantees as an unrealistic promise. “We haven’t lived through 40 years of socialism only to return to it on the grounds of the EU. No government in Europe is capable of meeting the guarantees for all the deposits in the country. There simply aren’t the capabilities for that.”
While promoting a time limit on the state guarantees issued by other EU countries, Kalousek did not rule out the possibility of doubling the current bank deposit insurance limit.
“It’s apparent that the cool-down will be bigger due to the financial crisis,” Kalousek said. “However, the Czech economy is in very decent shape, and the Czech banking sector is absolutely healthy. Therefore, it doesn’t mean that the Czech Republic will not get richer … only we’ll get richer slower than we’re accustomed to.”

Markéta Hulpachová can be reached at mhulpachova@praguepost.com


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