Elections may drive recovery

With government elections set for this fall, political parties will capitalize on economic recovery proposals to garner attention and votes, with the measures likely becoming more populist in tone.  

The fractured government has so far managed to continue passing legislation proposed before the government collapse. On April 3, the Chamber of Deputies approved a first reading of an amendment for faster write-offs on company assets such as property and cars. Property acquired between Jan. 1, 2009, and June 30, 2010, will be applicable for the faster write-offs, which will also cut budget revenues 9.4 billion Kč ($459.4 million) next year and 3.6 billion Kč in 2011.

"The faster write-offs will support investment demand," said Petr Sklenář, head economist at Atlantik, as entrepreneurs will be encouraged to continue making investment purchases during a period they may otherwise have frozen spending.

Czech Chamber of Commerce President Petr Kužel told the Czech News Agency April 3 that the amendment could also give a much-needed boost to the country's manufacturing industry, at least in the long term when demand begins to return.

"Faster write-offs should also raise demand for tangible property, such as machines, and they mean a welcome economic stimulus for domestic production companies," he said.

The Chamber of Deputies approved an amendment to the insolvency law on the same day that would protect companies from total liquidation and guarantee wages for employees.

On March 31, the government also began the approval process of anti-crisis measures proposed by the Social Democratic Party (ČSSD). The ČSSD agreed March 30 to support the government's anti-crisis proposals April 3 in exchange for the Chamber of Deputies supporting the approval process. Their measures include lowering the reduced VAT rate from 9 percent to 6 percent and a car scrap bonus of 25,000 Kč toward the purchase of a new car.

"They are focused more on supporting consumption. I don't think it can help the Czech economy get out of the recession; it can only increase the deficit and maybe increase the number of votes they get in the election," Sklenář said.

Claire Compton can be reached at
ccompton@praguepost.com