Europe's tiger

15.11.2017 - EB

How did the Czech Republic, with its 5% third-quarter growth, become the tiger of Europe? It's a fairly straightforward analysis, if anyone is willing to do it. First the Czech National Bank devalued the crown, perhaps at the expense of violating the law, and told people to spend their money and to borrow even more. Labor costs in euros fell by 5% and, more importantly, the wage-cost advantage was frozen in place for an indefinite period. Then the ČSSD-led government raised government spending by about 10% per year, using part of the deficit to boost investment incentives for call centers, shared-service centers and light manufacturing. The resulting influx of foreign investors pushed up wages and prices, and the CNB cut the crown loose. Czech workers with job security and stronger crowns in pocket started spending and traveling even more, even as some of the cost-conscious investors who made all this possible started to look for greener pastures.

Glossary of difficult words

straightforward - uncomplicated and easy to do or understand; 

influx - an arrival or entry of large numbers of people or things; 

to cut something loose - to relinquish or release something (from the Kč 27/euro cap, in this case);

greener pastures - an improvement over one's current position.



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