(Ondrej Schneider) November issue of our Economic Focus looks at the two most recent analyses of the Czech economy, published by the European Union and the World Bank. Both institutions identify similar sets of most important issues that should be dealt with. Both support a brisk overhaul of main Business code principles, mainly bankruptcy rules. Without these changes, they say, investments will remain locked in unprofitable enterprises. Both are also gung-ho on privatization of banks and remaining stakes in large industrial firms. Last but not least, both institutions are highly critical about the Czech public finance framework that allows huge off-budget expenditures and that is instrumental in alarming development of public budgets.
Our analysis compares these recommendations with the Cabinet strategy. Often, the government sees the same issues as the EU and WB. The Cabinet, being a socialist one, supplements its policies with a social aspect. The Cabinet differs in its approach to the public budgets. The Czech government bets that higher economic growth will solve the current deficits, while both the EU and WB are more skeptical, perhaps because they have seen such hopes dashed in the past.
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