The long term feud between Messrs. Havel and Klaus was rekindled, if it was needed, by the president apparent decision to appoint a new governor and vice-governor before he is deprived of his sole authority to do so by a new law. Interestingly, the new CNB law was criticized by the EU and IMF and is probably in a breach with the Czech constitution. So, the president says he has no reason to wait for a flaw law to be operational.
The finance ministry laid its cards: as the off-budget institutions will need at least CZK 100 bil. in next three years, the ministry wants taxes to go up. First to be raised are "consumption taxes", i.e. VAT and excises. The ministry acknowledges that spending could be cut as well, but says it will do that "later". It is, however, difficult to see what actually the government wants to do, as it pledged not to raise taxes to its "contract-opposition" partner ODS and "later" means after the next election that is due in 2002. Strategy, it ain't…
The Czech koruna had one of its stellar days yesterday as it gained to all-time-high 34.50 CZK/EUR and not due to another euro's troubles. The koruna strengthened vis-a-vis the dollar as well to 40.30 CZK/USD from Wednesday's 40.60 CZK/USD. There seems to be further demandfor the Czech koruna and some traders thus expect the koruna to pass the 34.50 CZK/EUR level. Would that be enough for the central bank to step in and calm the market?
Bonds gained negligibly on Thursday, gaining 10-20 bps. All eyes are on today's auction of CZK 4 bil. of seven-year bonds.