Czech central bank agrees with loan to IMF

However, the bank made it conditional on the approval of guarantees for possible losses.

The centre-right coalition government of the Civic Democrats (ODS), TOP 09 and Public Affairs (VV) agreed on the loan on Wednesday.

The CNB governing board said it would not recommend the provision of another loan to the IMF, but it had taken the promise of state guarantees into consideration in its decision-making.

President Vaclav Klaus criticised the loan previously.

The CNB approved the loan on condition the parliament passes a state guarantee for its possible losses. The guarantees would also apply to the previous loan to the IMF of 1.03 billion euros from 2009.

Since the opposition Social Democrats (CSSD) also support the loan to the IMF, the parliament should pass it smoothly.

"The bank governing board views the consent of the Czech parliament to the bill on a state guarantee of 2.53 billion euros as the expression of the priorities of the Czech Republic´s foreign policy," the CNB said today.

Finance Minister Miroslav Kalousek (TOP 09) welcomed the CNB board´s decisions.

"I appreciate it as an extremely accommodating step towards the government,"Kalousek said.

He added he can understand the bank board´s relevant arguments for not recommending the loan.

"The decision on the loan is political," he added.

On Wednesday the government also said it would cover the difference between a lower interest on the loan to the IMF and the CNB´s interest rate on safe investments that the CNB would otherwise use.

If the IMF were not capable of paying off the loan, the guarantees would be reflected in the state budget deficit, Kalousek said.

The Czech Republic was originally to lend 3.5 billion euros to the IMF.

By providing the loan, the Czech Republic will manifest that it belongs to the group of economically healthy EU member states, Minister Petr Necas (Civic Democrats, ODS) said.

CSSD chairman Bohuslav Sobotka welcomed the government´s decision on Wednesday.

Necas explained that the sum of 1.5 billion euros was calculated for the Czech Republic to give the same sum per capita as the neighbouring Poland. The originally planned 3.5 billion would be 2.2 times more, Necas said.

The loan was thoroughly negotiated by the prime minister, the CNB governor and the finance minister.

Last December, EU leaders decided at their summit in Brussels that they would give a loan of up to 200 billion euros to the IMF on the basis of bilateral agreements.

However, EU countries eventually did not agree on providing the total sum. Only the euro zone has pledged to give the money, 150 billion euros.

From the countries outside the euro zone, the loan has been refused by Britain and Bulgaria.

($1=19.597 crowns)

Author: ČTK
www.ctk.cz