Speaking on a political talk show on Sunday, Czech minister of finance Mr Miroslav Kalousek appeared comparatively upbeat about the prospects for the Czech economy in 2012. In early January 2012, he spoke of expecting to adjust government spending plans to accommodate a 2% decline in growth; now his ministry forecasts growth of several tenths of a percent.

Mr Kalousek said that "It appears that the January prognosis will show a so called positive zero growth, that’s to say a couple of tenths of a percent above zero. This means that there won’t need to be such large [stringency] measures; therefore, I won’t propose adjusting VAT rates in 2012."

Mr Kalousek said that the government will pay the Czech National Bank around CZK 200 million yearly to compensate for foreseen lost profits resulting from the EUR 1.5 billion loan the Czech central bank last week provisionally agreed to extend to the IMF upon the request of the government. The loan will be covered from the CNB's currency reserves.

The CNB said that the yield on its loan to the IMF will be significantly lower than if the bank invested the same amount in safe investments. The Czech central bank agreed to extend the loan on condition parliament passes a bill guaranteeing that the state will any cover losses resulting from a write down, or write off, of the loan to the IMF.

CNB has demanded guarantees of up to EUR 2.53 billion to cover the EUR 1.5 billion loan agreed by the government last week and a previous loan extended to the IMF in 2009.

(Sourced from www.ceskapozice.cz)