Czech Republic
After World War II, Czechoslovakia fell within the Soviet sphere of influence. In 1968, an invasion by Warsaw Pact troops ended the efforts of the country's leaders to liberalize Communist party rule and create "socialism with a human face." Anti-Soviet demonstrations the following year ushered in a period of harsh repression. With the collapse of Soviet authority in 1989, Czechoslovakia regained its freedom through a peaceful "Velvet Revolution." On 1 January 1993, the country underwent a "velvet divorce" into its two national components, the Czech Republic and Slovakia. Now a member of NATO and the EU, the Czech Republic has moved toward integration in world markets, a development that poses both opportunities and risks.
The country's social and economic system has changed dramatically since the split with Slovakia, with privatization transforming the country from a centrally planned into a free market economy. It has one of the most stable and prosperous of the post-communist economies. In 1997 a currency crisis triggered a recession from which the economy has since recovered. The Czech Republic faces challenges, however, to its position as the highest per-capita recipient of FDI in Central Europe, particularly as wage costs begin to rise. GDP growth is still expected to continue at 3% to 4% until 2007.
Vaclav Klaus of the conservative Civic Democratic Party succeeded Vaclav Havel, with whom he had many clashes in previous years, in the largely ceremonial role of president in 2003. He was finance minister in the first government of the post-Communist era and prime minister between 1992 and 1997 before financial scandals contributed to the fall of his government.
Jiri Paroubek, deputy leader of the centre-left Social-Democratic Party, became prime minister in April 2005 after weeks of crisis ended with the resignation of party leader Stanislav Gross amid a scandal over the financing of a luxury apartment. Paroubek is the country's third prime minister since July 2004 when disastrous results in European elections prompted the resignation of Vladimir Spidla.
General elections will take place in June 2006.
There are currently no known threats to expatriate visitors or residents in the Czech Republic.
As with other countries in Eastern Europe, the Czech Republic suffers from growing problems with crime and there are signs of increased organized criminal activity in the country. In August 2004, 17 people, including foreigners, were injured when a bomb exploded in a shopping area of Prague. Authorities say the attack was linked to fighting between rival organized crime gangs.
Political reforms made at the top level of government often have not trickled down fully to the bureaucracy. As a consequence, foreign business people often cite a convoluted -- or in some cases corrupt -- system at both national and local levels as impeding market access. Potential investors often must spend considerable time and effort to finalize a deal, or to enforce the terms of a contract.
Demonstrations protesting globalization and other IMF/World Bank related issues have turned violent in the past, such as during the 2000 IMF/World Bank summit in Prague which resulted in considerable property damage. There were about 4,000 anti-NATO demonstrators in Prague for the November 2002 NATO Summit but police presence was heavy and there were few reports of violence, arrests or property damage.
