That would be the Czech Republic’s presidency of the European Union, by the way, which the Eastern European country took on January 1st.
So why so bad? Well, on Wednesday the country’s statistics office reported industrial production fell by 17.4 per cent -the most since 2000 and roughly twice as much as predicted by analysts. As Bloomberg reports:
The 17.4 percent drop was double the median forecast of 12 economists and compares with a decline of 7.6 percent in October, the statistical office said in a report today. It was the steepest annual fall since 2000, when the office changed its methodology.
The numbers are so bad most analysts estimate the authorities will now be forced to cutback GDP growth forecasts for 2009 from their current lofty 2.9 per cent levels. The Czech Koruna fell as much as 1.5 per cent following the news.
RBC Capital Markets, meanwhile, also sees Czech interest rates falling from 2.25 per cent to 1 per cent as a consequence. But even this, they say, may be a cautious assessment.
Many analysts agree the Czech Koruna’s best chance now is entry into the eurozone but the Czech centre-right government has been putting off a decision on a euro-adoption date since it came to power in January 2007.
Making matters worse, and spooking most other EU members, are harsh words from self-declared euroskeptic and Czech president Vaclav Klaus. Klaus has officially dismissed the country’s EU presidency as ‘unimportant’. In other worrisome tones he wrote in the FT last week that he hoped the Czech government would not push the world and Europe into more regulation, nationalisation, de-liberalisation and protectionism. Meanwhile, on further ties with Europe – the Czech Republic being the last EU country to commit to the Lisbon treaty reforms – he posed the following:
As regards the EU’s “constitutional” stalemate, the Czech government will — hopefully — not lead Europe to an ever-closer union, to a Europe of regions (instead of states), to a centralised, supranational Europe or to an increasingly controlled and regulated Europe masterminded from above. It will keep stressing its EU presidency slogan “Europe without barriers”, which means the advocacy of further liberalisation, removing trade barriers and getting rid of protectionism.
All very well if your economy can stand alone, but what happens when it begins to waver?
Adding to the inauspicious momentum is the recent hospitalisation of the country’s post-Soviet hero and former president Vaclav Havel, who according to reports remains in a ‘serious’ condition after undergoing surgery for a respitory inflammation on January 12th.
Related link:
Do not tie the markets – free them – Vaclav Klaus on FT.com