Press Conferences

10. 11. 2008 14:13

Press Conference of the Prime Minister Mirek Topolánek after the Meeting with Representatives of the Czech Bank Association on 10th November 2008

Jakub Stadler, Deputy Head of the Press Unit: Ladies and gentlemen, welcome to the press conference after the meeting of the Prime Minister of the Czech Republic, Mr. Mirek Topolánek with members of the Czech Bank Association. I welcome both Mr. Prime Minister Mirek Topolánek and the President of the Czech Bank Association, Mr. Jiří Kunert. And the Deputy Minister of Finance Mrs. Klára Hájková is here as well. I ask the Prime Minister for his introductory speech.

Mirek Topolánek, Prime Minister: As an introduction I would like to say that the government closely coordinates its fiscal policy and discusses the monetary policy with the Czech National Bank. You certainly know that I have met analytics of various financial institutions in the course of those sensitive weeks of the global financial crisis and I had a meeting with Mr. Kunert, the President of the Czech Bank Association and with about twenty-five representatives of the entire bank sector to discuss two key issues. First, it was the state of the bank sector and the financial sector in the Czech Republic in these weeks; we discussed what would be necessary to do – that is why I summoned that meeting in the presence of the Minister of Finance Kalousek – the expected impacts on the financial sector of the Czech Republic and we also debated what the government could do in cooperation with bank and with the central bank for reduction of any impacts of the economic recession in the West Europe, in the Eurozone so that to ensure our citizens and firms smooth survival of that period. We also discussed fiscal instruments of the government which could solve the situation. We agreed with Mr. President Kunert that our banks showed sufficient liquidity and had sufficient capital for coverage all risks. The Czech Republic has been passing through these times very well for the present and thus any non-standard or above-standard steps were not necessary to be taken. As you know, the Chamber of Deputies will be debating the proposal for increased insurance of deposits tomorrow up to 50000 euro, which is absolutely sufficient measure in this moment from the point of view of deposit security. What all of us want is to eliminate the principal cause, or rather the principal impact or consequence of the crisis that came from America, and it is the crisis of confidence. We want to ensure more confidence in the financial sector and in the entire area. We agreed that the greatest risk was the development of the foreign demand. As an export-oriented open economy, we are markedly dependant on the economic situation in the Eurozone, in the European Union and especially in Germany. Together with the Czech Bank Association we will be trying to closely monitor the development and to consult the individual steps which will be taken in the sphere of instruments to solve the financial crisis. We will also consult the discussion on the European level, as four principal directives will be debated in the course of our presidency, whether it will be the directive concerning the capital adequacy or the directive concerning insurance, so called insolvency two. I would like to say that we stated great satisfaction with activities of the central bank. The central bank has kept a level head in the entire period and it took only those measures which were standard as far as our law and the Act in the Czech National Ban are concerned. The reduction of the Lombard rate by 0,75% was a significant impulse which was to stabilize the financial sector ... inarticulate ... problems of the inter-bank contacts. Now it would be best to give the floor to Mr. President, and then I will try to comment on some of tools which the government will have to use to reduce economic impacts, economic consequences of that financial crisis. You have the floor.

Jakub Stadler, Deputy Head of the Press Unit: Thank you, Mr. Jiří Kunert has the floor.

Jiří Kunert, President of the Czech Bank Association: Good afternoon, I would like to add to that detailed introduction of the Prime Minister that it is confidence which is very important for banks, such confidence which would enable us to make business. It means confidence in the situation and in the state, confidence in regulation which is very important for us as we manage deposits, confidence in our clients and confidence between the individual banks, and so on. I am of the opinion that just today's meeting contributes to the confidence which we have in the government and in measures which are necessary to be taken to overcome the future development in the Czech Republic. We cannot say that we are a small island amidst stormy sea. We are influenced by the situation in the world. I think that the financial crisis has not stricken the Czech Republic so hard like some other countries, and I think that banks cope with those impacts very well. Nevertheless, we will see what the future development of the Czech economy will be like. That is why we discussed today some measures which could be taken to overcome this period without problems. In my view today's discussion was very good and I would say that our trust in the government is really very good. I would also like to say that this trust should be extended in the entire republic so that we could jointly overcome that what is perhaps ahead of us.

Mirek Topolánek, Prime Minister: So, I will continue if I can. We agreed that it was very important that we, unlike other countries of this region, had stabilized public budgets and that we had done those changes of mandatory expenditures. Generally, I would say that in the situation when cooling off the economy was expected, we took number of steps which facilitate that situation and that facilitate its solution. I emphasize that we must finish reforms which mean further stabilization of public budgets, reduction of state expenditure and solving public pillars which influence the financial stability of the Czech Republic. Thus I indicate that we will want to continue those steps as it is shown that it is the only one possible solution in the long-term time horizon. The President has not mention that we were of the same opinion regarding the fact that the turbulences on world's financial markets should not have influence of financing our firms and providing credits to them, in spite of the fact that there are certain problems in the inter-bank operations. As far as those measures which could be taken by us are concerned, we will have a meeting of economic ministers on Wednesday at which we will debate certain possible measures which would strengthen the offer side of the Czech economy and we will solve certain problems connected with cooling down the economy and growth decline in the following period. At every meeting of the government we debate the EU agenda, and we will also debate as a obligatory item just those measures. There will be debate held on these proposals or tools aimed at solving problems concerning the economy and financial crisis. We will be trying, in spite of the fact that there is no space for maintenance of low credit rates, to boost investments and exports. We would like to intensify the communication not only with the central bank, which is standard, but also with the Czech Bank Association and further partners. We prepared a meeting with the Chamber of Commerce, with the Union of Industry and Transport to discuss unambiguous steps which would strengthen confidence and solve some problems. We regularly get information from the Czech National Bank and we want to get more detailed analyses concerning the interest rate development. We would like not only to use resources of the state budget but also resources of the European Investment bank or to try to transfer certain structural funds in the framework of the operational programmes so that they would be aimed at just those measures which are being prepared. We would like to strengthen institutions like Českomoravská záruční a rozvojová banka (Czech-Moravian Guarantee and Development Bank), Česká exportní banka (Czech Export Bank), insurance company Egap to create better conditions for exports and to enhance export efficiency in the situation when demand on world markets is declining. We would like to support small and medium-size enterprises or to boost mobility of labour force as the unemployment rate is only 4,3% according to the methodology of the EU; according to our methodology it is about 5,4%, which is the seventh lowest unemployment rate in Europe. We have 150000 jobs available, large space for employment of foreign workers; nevertheless, it may happen that the regional unemployment rate will increase and we want to have number of tools which would enable us to solve the situation. No increased unemployment threatens at present, but we are afraid of this problem because of the economy decline in the next year. We want to have tools available in the sphere of unemployment, migration or other spheres. Now I thank your for your attention and there is time for your questions, or questions to Mrs Deputy Minister of Finance who is responsible for negotiating those directives which I have mentioned here and which concern the bank and insurance sector.

Jakub Stadler, Deputy Head of the Press Unit: Ladies and gentlemen, there is time for your questions. Who will be the first one? The Czech News Agency.

Czech News Agency: Good afternoon. I would like to ask the President whether the Prime Minister informed you on measures in the personnel sphere. He intended to strengthen the economic team of the government. Did he inform you on details? Thank you.

Jiří Kunert, President of the Czech Bank Association: I do not think it was important. For us the important matter was that what has already been mentioned and the personnel affairs are within the competence of the Prime Minister.

Jakub Stadler, Deputy Head of the Press Unit: Further question, Mladá fronta Dnes.

Mladá fronta Dnes: Good afternoon, I would like to ask – with regard to the fact that the opposition dared you to start a discussion on the introduction of euro in connection with our EU presidency, I would like to ask you if such a discussion would led on setting a time schedule regarding euro introduction. The second question - you said that it was necessary for reforms which would result in reduction of expenditures to continue. What do you think in this context on the fact that some colleagues of yours enters nearly anti-reform coalitions which are aimed at dismounting part of those reforms, for example fees in the health care sphere? Thank you.

Mirek Topolánek, Prime Minister: I am of the opinion that fees in the health care sphere are marginal matter which is not directly connected with our discussion. The fact that such a topic has been made of this issue testifies to our political scene, opinions of the general public but not the economic or financial crisis. If there is no will to continue the reform efforts in this area at the Chamber of Deputies, it will be the opposition which will bear full responsibility for those problems. The government will not function if it does not have majority to implement these changes. Most of these steps are steps of an executive character and the government does not need the Parliament for their implementation. The government is able to decide on great number of these steps itself. That was the first answer. The second one concerns the introduction of euro. The Ministry of Finance submits the report on fulfilment of the individual criteria and on possible risks in this area every year. I am of the opinion that the discussion on the euro introduction is rather artificially created especially at the present time when the Growth and Stability Pact has broken up in fact, as great number of countries do not meet the Maastricht criteria. In this respect it is important for me to meet the convergence criteria and to draw near to the real Eurozone than to discuss the euro introduction. If everything turns out well and impacts of the financial crisis are in compliance with optimistic presumptions in the next year, I suppose we will be able to set the exact date in the course of the next year. Nevertheless, I would regard it rather as a political proclamation to do it now and I find it inappropriate to connect it with our presidency. The government is not able to set the date now because it is impossible. Only in the next year it will be clear whether we meet criteria, whether we are able to meet them in a long-term time horizon; only after that we will be able to set the exact date. I am sure that there is nobody here without political motives who would be able to set the date now.

Jakub Stadler, Deputy Head of the Press Unit: Thank you, further question, please.

Journalist: ... inarticulate ...

Mirek Topolánek, Prime Minister: I do not believe economists who predicted the financial crisis. I think that if you constantly predict something, then you must be successful sometime. The crisis has begun because of faulty regulation and state interventions into mortgage credits at mortgage banks in the USA. Conditions for credit providing were simplified for those clients who were not able to show reliability and solvency and who would not have normally to be provided a mortgage. Thus, clients and banks cease to behave cautiously. The moment when the increase of credit rates took place that bubble fizzled and the infection spread out to the whole world just because of the existence of the market with derivates of those credits. Thus those toxic assets spread out to the whole bank world. I point out that in case of the Czech Republic it had minimal effect. The moment when the confidence crisis began followed by the liquidity crisis, banks ceased to have enough money and therefore they had to be rescued by the individual states or other institutions. It is not the case of the Czech Republic. When we are talking about causes, we are talking about system causes and I am of the opinion that if we want to find tools for a solution we must thoroughly discuss those causes so as not to make mistakes resulting in over-regulation of the entire system. That discussion will be led about capital adequacy where our conditions are stricter in this area in comparison with the Eurozone, it will be led about the sphere of regulation of the entire financial market, on hedge funds, security and various derivates. Also rating agencies will be debated, which is a very sensitive topic, as well as some new global tools of finance management will de discussed, some new Bretton Wood, and we are very careful so that we would not throw out the baby and the entire bank sector with the bathwater, as the bank sector is a spine of every economy. That is why we must not restrict it much because it might cease to function, it would rely only on state interventions and the state liquidity and thus credit granting would be impossible for private subjects. That cause is known, those impacts are not definite at present and they will transfer to the reduced economy growth on global level. Growth on the level of some 3,7% is expected if I am not mistaken. And it is still very optimistic prediction and it may cause number of problems and impacts on economy of various states, it may influence the standard of living, employment and such like. Perhaps Mr. President would like to add something.

Jiří Kunert, President of the Czech Bank Association: I think that Mr. Prime Minister explained it very well, I would offer him a job in a bank, because the analyses are exactly in compliance with this and we will see what the next development will be like We will discuss how to solve the situation and how to cope with new challenges as far as regulation and other issues are concerned.

Jakub Stadler, Deputy Head of the Press Unit: Thank you, further question, please.

Reuters: I would like to ask Mr. Kunert whether he noticed any calming down of the situation on the bank market after that decrease of credit rate of the Czech National Bank or whether you expect it in the future.

Jiří Kunert, President of the Czech Bank Association: In my view the credit rate decrease was a right measure on the one hand, but on the other hand it did not help to calm markets. It is confidence which is very important. I think that that confidence is recovering although the development is very slow. We can notice certain improvement; nevertheless I think it will take some time.

Jakub Stadler, Deputy Head of the Press Unit: Thank you, further question, please.

Journalist: ... inarticulate ...

Mirek Topolánek, Prime Minister: It is true. I do not know whether it will be directly from the state budget or whether it will be another type of money, but it will be money about which will the state will decide. I was talking about the cooperation with the European Investment Bank and there is great number of other tools there. We are only beginning to discuss them. We have been talking about the Czech Export Bank about Egap about boosting their roles; nevertheless, we will have to talk now about concrete financial procedure. It can be financed from the state budget, but it need not be. The second question concerns the European funds. It is possible to transfer part of the money within the individual priorities and challenges as there are number of tools especially for small and medium-size enterprises and in particular for starting business and such like. It is possible; it will have to be approved by the Monitoring Committee. It would be very complicated but it is one of possible solutions how to use that complementary financial tool for reduction of those impacts. If we wanted to use our own operational programmes, it would mean discussion with the European Commission. We are constantly trying to enforce economies into the Housing Operational Programme economies which would lead to the reduction of the energy intensity of housing and generally of buildings. There is certain promise that it might be possible. I am of the opinion that it might be possible to reach certain modifications with regard to the current situation and through far more frequent contacts with the European Commission during our EU presidency; nevertheless, I do not rely on it. It is very complicated to interfere into a running system and that is why we regard it as a motion that might be debated, not as a measure which could be implemented by ourselves without taking external influences into consideration.

Jakub Stadler, Deputy Head of the Press Unit: Thank you, further question, please.

Czech TV: I have a question concerning rather a different topic. I would like to know whether you could comment on the information of EURO weekly regarding your alleged offer of a compromise to the Prague Mayor Bém.

Mirek Topolánek, Prime Minister: I did not offer the Mayor Bém any compromise. Primaries in the ODS (Civil Democratic Party) are in progress now. We are competing to win support of members of the ODS and delegates of the congress. I regard it as very internal issue and I am not going to express my views. It was rather the wish which is father to the thought. I cannot see any space for making a compromise now. Besides, I do not know what compromise you had in your mind – that I should leave now or how did you mean it? Perhaps it is the wish of many people.

Jakub Stadler, Deputy Head of the Press Unit: Thank you, the last question, please. If there is not any, thank you and goodbye.

Mirek Topolánek, Prime Minister: Thank you, have a nice day.

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