Press conference of the Prime Minister of the Czech Republic, Mirek Topolánek after the meeting of the government held on Wednesday, 30th May, 2007

Jana Bartošová, government spokesperson: Good afternoon, ladies and gentlemen, welcome to the press conference after the meeting of the government. I welcome the Prime Minister, Mr. Mirek Topolánek and the Minister of Finance, Mr. Miroslav Kalousek. Now I give the floor to the Prime Minister.

Mirek Topolánek, Prime Minister of the Czech Republic: Good afternoon. As an introduction I would like to say that apart from other things we were solving in the framework of European issues the decision of the government relating to taking a legal action against the European Commission concerning over-limit store, except of sugar. I suppose everybody knows this case and we are convinced that our position is very strong. It rather concerns the debate of the individual statistic offices and the government decided to take a legal action. I think that a very significant was the debate on the Anti-Discrimination Act. We have suspended that point rather because of formal reasons. There is certain lack of clarity regarding disabled persons and some other formulations and we will debate this issue at the next meeting of the government. We approved the Bill on Emission Limits. This bill was simplified after the discussion held at the meeting of the government some weeks ago. Number of tables and annexes was reduced and all the ministries involved expressed their approval. To mention concrete names – Martin Bursík, Martin Říman and Petr Gandalovič and I regard this as a great success and I think it was worthwhile to work on it for some further weeks. The other issues, which were approved, were not very significant. To mention some significant ones it was the decision on the property participation of the state or on privatization of Škodaexport, joint stock company, which had been discussed for a long time. The government decided on the way of privatization. As far as significant issues are concerned, a very significant point, which was suspended, was the bill on solution of digitalization. It is an issue, which is interesting for present participants of the process, representatives of TVs. The proposal was worked out by the Ministry of Interior and it would be, in compliance with the new competences, submitted by the Ministry of Industry and Trade and the Ministry of Culture. It is a compromise concerning implementation of digitalization and relating problems. It is in fact a decision on invalidity of licences granted by the Council for Television and Radio Broadcasting. It concerns of course the discussion on funding of the Cinematography Fund. I would like to say that the bill will be debated on 18th June again and there will be certain changes of legal character made. Following the proposal of the Minister of Interior, we removed Jiří Lang, director of the Office for Foreign Relations and Information from his function after he fulfilled his task to bridge certain period of time after the removal of Karel Randák; the existing deputy director Schwarz was appointed to this function. I think that it is all regarding issues that we debated. Perhaps one more issue – we approved a material, the title of which is Programme Targets of the Government of the Czech Republic by 2010. In the material there are graphs, priorities set, time schedule, sequence of steps, linkage of the individual targets, both partial and principal ones, and we want to submit this material to lawmakers, so that they could check the time schedule and a "roadmap" of action of the government. We debated also control and supervisory activities of the Office for Personal Data Protection from the point of view of our accession to the Schengen area. We did not finish the debate on this material either, we have certain reservations. Besides, we established a commission for relationship settlement between the state and churches and religious organizations. This commission is established on the ministerial level and has six members. Members of the Commission are Minister Kalousek, Minister Gandalovič, Minister Jehlička, Minister Schwarzenberg, Minister Stehlíková and the Vice-Chairwoman of the Chamber of Deputies Miroslava Němcová. The Minister of Culture Václav Jehlička will be the chairman of the commission, of course. I think it is all regarding key issues. Thank you.

Jana Bartošová, government spokesperson: Thank you, the Minister of Finance, Mr. Miroslav Kalousek has the floor.

Miroslav Kalousek, Minister of Finance: Thank you. Ladies and gentlemen, as you know, the government decided on the property participation of the state in Škodaexport, Joint Stock Company. It concerns in fact re-privatization, because the Czech government decided in 2001 on financial restructuring of Škodaexport, which was in complicated situation and the state became a majority shareholder. Now we are starting re-privatization of the property participation. The Ministry of Finance is 100% shareholder, i.e. the only one shareholder of the company. The government decided on privatization of this share, it decided on the public tender, which will have two rounds. In the first round the participants must show fulfilment of qualification criteria and those who fulfil them may participate in the second round, in which there will be the only one criterion – offered price. The government also decided on establishment of a commission for assessment of those offers; two representatives of the Ministry of Finance, two representatives of the Ministry of Industry and Trade, one representative of the Office of the Government, the Czech Export Bank and EGAP will be members of the commission, because both the Czech Export Bank and EGAP are significantly engaged in Škodaexport´s activities. So much for the privatization decision of the government, and I would like to use this opportunity to present my opinion concerning an issue, which was not on the agenda of the meeting of the government, but which is a media topic; I mean the assessment of the European Commission concerning fulfilment of the Czech convergence programme. We are of the opinion that the assessment is extraordinary critique. The European Commission regard as the most urgent the same problems as the Czech government, i.e. high share of mandatory expenditures, necessity to implement pension reform, reform of health care system. Commissioner Almunia presented his apologies for the state of Czech public finances. I think that even stronger expression could have been used; "apologies" is a diplomatic expression. I can only say that the critique is unpleasant, of course, but what is more unpleasant – it is absolutely objective and true. The Czech Republic did not have any objective reason for such a deficit and especially for such trends of autonomous development of public budgets after several years of economic growth. There was no environmental catastrophe, no war, there was dynamic development of economy here, but in spite of these facts scissors between revenue and expenditure side of the state budget has been opening. The political irresponsibility is the cause. There was no other reason for fiscal expansion in the times of economic growth. Therefore our primary task is to close those scissors of public budgets and launch reforms; not because of the critique of the European Commission but because of the future of the Czech Republic. I will argue for our convergence programme at the session of the Council of Ministers of Finances of the EU on 9th July, I will respond to the critique of the European Commission and that of my colleagues. My advantage is that it will be after the debate on the reform package at the Chamber of Deputies and so I will be able either to demonstrate the first reform efforts of the government, which will lead to deficit reduction, or as a minister in demission I will have to announce that there is no reform atmosphere in the Czech Republic. Provided we are not able, through our reforms, to meet our obligations that we have been breaching – because we ourselves undertook to set expenditures limits, we ourselves undertook to use higher revenues, resulting from higher GDP, for deficit reduction - if we continue in this policy, we will have to expect that not only the European Commission, but also our partners in the EU, i.e. those 26 member states, will not be willing to pay anything and they will restrict possibility to use structural funds. This is also one of reasons why those reform measures are absolutely necessary.

Jana Bartošová, government spokesperson: I thank the Minister of Finance, Mr. Miroslav Kalousek and now there is time for your questions.

Helena Šulcová, TV Prima: Good afternoon. I would like to ask a both gentlemen about the Anti-Discrimination Act, whether you had some reservations, and what reservation you had.

Mirek Topolánek, Prime Minister of the Czech Republic: I will express my opinion on the Anti-Discrimination Act after it is approved.

Miroslav Kalousek, Minister of Finance: I said in the morning that I did not think that we had to have a law for everything. Nevertheless, the Anti-Discrimination Act is a necessary transposition of a European directive; it means we fulfil our obligations. I think that the important thing is just to transpose the directive and not to extend it by certain issues, which I regard as useless. But I will express my opinion after the law is approved; those issues may not be included in it.

Jana Bartošová, government spokesperson: Further question, please.

Kamil Houska, TV Nova: Good afternoon, I have a question to the Prime Minister concerning the critique from the side of the European Commission. Do you think that you reform is strong enough to improve this state or it will just stop that increasing indebtedness?

Mirek Topolánek, Prime Minister of the Czech Republic: The intention of the reform is not only to stop expansion of public and mandatory expenditures; the reform will be aimed at deficit reduction. It means that certain trends are set; we will not only fulfil our criteria, we will not only be exposed to a critique of the European Commission, but we will be meeting convergence criteria, which could lead to the adoption of euro, in the long term. The reform, as it is set, is quite sufficient. If it is approved it will remove reservations of the European Commission, which were presented today.

Miroslav Kalousek, Minister of Finance: If I may say few words, I think that the reform efforts of the government could be described like this. The first reform package, which will be debated by the Chamber of Deputies next week, is aimed at removal of what have happened. Next steps are unnecessary responses to the future development, especially to aging population, which are involved mainly in the pension reform and in the reform of the health care system. I think that these are issues the government is facing; to rectify that what have happened – this is the package A, and to answer to challenges of the future development – package B.

Mirek Topolánek, Prime Minister of the Czech Republic: Of course, as to the public finances, it is true, nevertheless the first stage of the pension reform will be passed to the Chamber of Deputies as early as this year in spite of the fact it is not a part of the package, which will be debated in the Chamber of Deputies next week.

Jana Bartošová, government spokesperson: Further question, please.

Jan Hreňo, ČT: I will revert to Škodaexport. I would like to ask whether you have an idea of privatization revenue and whether it is decided how the revenue could be used, e.g. for the Transport Infrastructure Fund.

Mirek Topolánek, Prime Minister of the Czech Republic: Financial means will be transferred to the revenue side of the state budget, they are not reserved, and they will be transferred to the privatization account. As to Škodaexport, I would say that the revenue is important, of course, but far more important is that there are number of guarantees there of the Czech Export Bank and of our state insurance company EGAP. There are number of concluded contracts there and number of contracts that are being prepared. It is a company, which have not lost its good name in abroad during those 17 years after the revolution and so we want the company to be here for the benefit of our factory exporters, if it is possible. We estimate the revenue at the amount of some hundreds million crowns, but I do not want to anticipate, because it is a question of the second round of the tender. We are not able to estimate what the price will be, what the assessment of the company, contracts of which amount to billions crowns, will be from the side of investors. In this sense I cannot not anticipate the revenue; it is not the main criterion.

Miroslav Kalousek, Minister of Finance: I firmly believe that we will get higher amount than that I expect and that I will not disclose, of course, because nobody would offer a higher amount in this case.

Jana Bartošová, government spokesperson: Further question, please.

Daniel Takáč, ČT: Good afternoon. I have a question to the Prime Minister; I would like to revert to that critique of the European Commission regarding our public finances. I would like to ask the Prime Minister if he can unambiguously identify the culprit of that situation and a question to the Minister of Finance who said that in case of no action from our side, the other European countries would refuse to provide us with money. Is there any estimate how much could it be? Thank you.

Mirek Topolánek, Prime Minister of the Czech Republic: Regarding your first question, the answer is quite simple. After initial effort of the government of Špidla not to implement those measures, they are all the three cabinets, i.e. cabinet of Špidla, Gross and in particular cabinet of Paroubek in the last half a year. It can be quite easily proved by figures, which are available.

Miroslav Kalousek, Minister of Finance: If we take into consideration vote in the Chamber of Deputies, we could perhaps to broaden the spectrum. I am of the opinion that all the political representation of the last 12 years is responsible for that. I myself adopt my responsibility. As to the question concerning how much it could be, we can expect that the European Commission will formulate its recommendations concerning the Czech Republic within two months and the Czech Republic will have time by January 2008 to demonstrate that it is ready to accept those recommendations and that it really pushes reform steps. In case we would not do so, in other words if the reform steps are not supported, the sanction proceedings will be started in the beginning of 2008. There is no precedence in the European Union so far and therefore it is difficult to estimate or quantify those sanctions. But there is not doubt that that they will be used and that certain reduction of use of structural funds would occur. If I were my colleagues and if I assessed a country, I would act in the same way, of course. In such a case it is not a decision of the European Commission, it is a decision of all countries. Why should countries which are responsible regarding their financial policies pay money to some irresponsible country? There is an unambiguous answer to this question – why should they pay? They will not pay anything to us.

Jana Bartošová, government spokesperson: Thank you, further question, please.

Jan Hreňo, ČT: Excuse me that I revert to Škodaexport once more. What the reason for privatization of Škodaexport? Will the expected revenue cover those costs, which resulted from the purchase of the company by the state in 2002?

Mirek Topolánek, Prime Minister of the Czech Republic: I will reverse the question. Why not to privatize the Škodaexport?

Miroslav Kalousek, Minister of Finance: It is a philosophical question and it is quite correct. This government does not think that the task of the state is to own breweries and trade companies and entrepreneurial subjects. Citizens did not establish the state for those purposes. It means that the intention of the government is to privatize its property in all the cases where it is not necessary to posses them. It is not a purpose to participate in business.

Jana Bartošová, government spokesperson: Thank you, further question, please. There are no further questions. Good-bye

Mirek Topolánek, Prime Minister of the Czech Republic: Thank you, have a nice day.