The Czech koruna is unhealthily overvalued against the euro thus
jeopardizing any export-led recovery. The CNB was forced to intervene
in the foreign exchange market and buy in excess of 2 billion euros
last year - four times the amount it did in 2001. It also cut its
interest rates last month to their nadir since independence. This did
little to dent the country's burgeoning current account deficit, now at
over 5 percent of GDP.
Unemployment in January broke through the psychologically crucial
barrier of 10 percent of the workforce. More than 540,000 bread earners
(in a country of 10 million inhabitants) are out of a job. In some
regions every fifth laborer is laid off. There are more than 13 - and
in the worst hit parts, more than 100 - applicants per every position
open .
Additionally, the country is bracing itself for another bout of floods,
more devastating than last year's and the ones in 1997. Each of the
previous inundations caused in excess of $2 billion in damages. The
government's budget is already strained to a breaking point with a
projected deficit of 6.3 percent this year, stabilizing at between 4
and 6.6 percent in 2006. The situation hasn't been this dire since the
toppling of communism in the Velvet Revolution of 1989.
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