Economic, Investing and Money - Business news

Rpt cee money austere rhetoric may play role in czech downturn

´╗┐Kalousek admits to asking himself a frequent question about his hard line on budget cuts: "Have we frightened people too much?"His determination to preserve the country's reputation for sound finances is widely blamed for an economic contraction that has lasted since the middle of 2010. But Kalousek's question, disclosed in an interview this week with Ekonom magazine, begs another: why has the Czech contraction lasted so long when the country's emerging European peers have suffered less?In terms of slashing the budget deficit, the government here has not been as fast or aggressive as Poland's or Slovakia's. Yet these other economies are growing, the Czech Republic's is not, and data suggests that notoriously thrifty Czech consumers have reacted more anxiously to spending cuts and tax hikes than Poles or Slovaks. Some people say the government's approach may play a role."The recession is definitely because of the government," said Daniel Nosek, a 68-year-old private business owner. "People are very bitter and they are busy counting how much every new government measure will cost them."In the third quarter of last year, a 2.4 percent annual fall in household consumption and a 9.4 percent drop in gross capital formation undercut a rise in exports, creating a third straight quarter of recession.

Czech consumer confidence is also at its lowest point in 13 years, highlighting a palpable sense of fear that has caused Czechs to hunker down and companies to stop spending, worsening the downturn."The small Czech saver is so terrified and so afraid of the future - and this concerns companies too - that to a certain extent we are worsening an already not-so-good situation," Mojmir Hampl, deputy governor of the central bank, said on Czech Radio on Tuesday. RHETORIC The government has prided itself on its deficit cutting zeal, noting that its borrowing costs have fallen to below those of many euro zone countries, saving it billions each year in debt maintenance. Investors agree, paying just 13 basis points over equivalent German bunds for two-year Czech debt, well below the 320 and 550 basis point premiums that investors demand to hold comparable Polish or Hungarian paper.

All these debt cost measures have been at record lows, due at least in part to a "wall of money" created by the world's big central banks trying to revive their economies. But economists say the Czechs' stringent approach to belt-tightening has bolstered its image as a safe bet, even if Necas and his close ally Kalousek have cut the budget deficit less than their neighbours. Kalousek has shrunk the budget deficit by almost 40 percent, to an estimated 3.5 percent of gross domestic product (GDP) last year, since the shortfall was biggest in 2009. But the total 2.3 percentage points of consolidation is less than Slovakia's 3.4 points over the same period, helped by one of the highest growth rates in the European Union. Poland, the region's biggest economy, has cut by 4.4 points to the same level as the Czechs even though they started a year later. Those two countries have benefited from other factors, including an expansion in car production in Slovakia and billions of euros in infrastructure spending partially funded by the European Union in the runup to the Euro 2012 soccer tournament in Poland.

But government rhetoric has also appeared to play an important role in keeping confidence up and the economy rolling ahead. While Kalousek has warned the Czech Republic could go the way of Greece if it did not cut its fiscal overhang, Polish officials have mostly focussed on trying to find ways to keep the country's economic expansion alive."Clearly it doesn't make sense for (Czech) consumers to be as pessimistic in 2012 as they were in 2009, and they are. They are that or worse. That seems puzzling," said Daniel Hewitt, an economist at Barclays Capital."I think it's what the government did. They not only said they were going to do austerity. They did it in ways that was consumption limiting... by cutting wages, affecting pensions and social expenditures. Then they said there will be more to come, lots more to come."Kalousek and his ally Prime Minister Petr Necas backed off their hard line near the end of last year and allowed the 2012 deficit to widen slightly to an expected 3.5 percent of GDP, from an earlier target of 3 percent. The finance minister also conceded in the Ekonom interview that harsh rhetoric may have played some role in depressing Czech spending, saying he was able to accept criticism that the government's austerity drive should have also included "some glimpse of hope". But when asked whether the government could change its rhetoric, he did not abandon his cautious stance."This government is, in short, convinced that the consolidation of public finance is essential," he was quoted as saying."We have faced a crisis, and ahead of us there is probably a relatively long period that I would mark as a great stagnation. Most of Europe will probably see that for a number of years to come. Everyone will therefore think twice about spending every crown."

The last taboo why nobody talks about money

´╗┐(The writer is a Reuters contributor. The opinions expressed are his own.)By Chris TaylorNEW YORK Everyone knows there are a few hot-button topics that can make any conversation go nuclear. Religion. Health. Politics. Death. But when it comes to the most difficult conversation you can possibly have, a new survey from Wells Fargo & Co found one clear winner: money. Money landed right at the top, says Karen Wimbish, director of retail retirement for the Charlotte, North Carolina-based bank. "I don't know that we expected that."In fact, 44 percent of Americans point to personal finances as the most challenging chat anyone can possibly have. Even the existentially terrifying topic of death, which you might expect to top such a survey, comes in second at 38 percent. Also far behind are perennially explosive topics like politics at 35 percent, and religion, 32 percent. Wondering who would rather talk about anything in the universe other than personal finances? Meet Denver's Natasha Lannerd."I am definitely one of those people," says the national sales manager for an organic tea company. "It kills me to talk about it, just kills me. I have had this problem so long, I don't even know when it started."Lannerd, 28, says the silence was originally a family trait. Nobody in her house ever spoke about money when she was a kid, so she never got in the habit of talking about it as an adult."I grew up in a single-parent family, we didn't have a lot, and we just never talked about it," she recalls. "As a result, when I grew up and started making a fair amount of money, I never had a plan and could never stick to a budget.

"I started to worry that I would work 50 hours a week for 20 years and end up with zero dollars in my savings account. I didn't want that to happen to me."She was finally able to broach the subject with the help of financial planner Maggie Kirchhoff, who forced her to get her fiscal house in order. But without that encouragement, she figures she might have kept her lips zipped indefinitely. So what exactly is going on here? In a society that is ostensibly one of the wealthiest in the world, why is everyone so frightened to talk about such a basic subject?"It is such a loaded conversation, and there is so much subtext and hidden meaning wrapped up in money," says Daniel Crosby, a behavioral finance expert and head of IncBlot Organizational Psychology in Huntsville, Alabama."Money is shorthand for happiness, power, and personal efficacy, so it can be very scary," Crosby says. "When money is short, it can be seen as a deficiency on the part of the breadwinner, and when there is lots of money, there can be fears that greed takes the place of genuine love."

Whatever the reason for avoiding the subject - money mistakes, embarrassment, fear of conflict - silence is no long-term solution. Here are four key principles to keep in mind to help you get over the hump and talk openly about your this site FEEL THE SAME WAY People often keep their mouths shut about money because they feel alone and scared. If you know that virtually everyone else you see on the street is thinking and feeling the same thing, perhaps you would not be so reticent."People having hard conversations about money should be upfront about the difficulty and discomfort," says Crosby, who wrote the book "You're Not That Great" about our human tendency toward behavioral screwups. "And those receiving the news should appropriately respect the trust it takes to have such a hard conversation."SILENCE HURTS YOU When we put off the hard conversations in life, we tend to think of it as benign procrastination: We will get to it all eventually.

Instead, we should think of silence as damaging the quality of our lives. Without attention, after all, money problems only tend to get bigger."Being withholding about money is a form of loss of intimacy," says Crosby. "Where there is no intimacy, the relationship will die, guaranteed."SILENCE HURTS OTHERS If you tend to clam up about cash, pause for a moment and think about the longer-term effects. As seen with Natasha Lannerd, you are likely to pass your traits down to your kids, who might turn pass them to their kids. Your bad habits could be amplified 50 years down the road."What we know about money, we generally learn from our parents," says Wells Fargo's Wimbish. "If you are a parent and you are not having money conversations with your kids, you are handicapping the next generation of savers and investors."YOU CAN ASK FOR HELP Even if you never talk about money and would not even know where to start, people who deal with this stuff for a living can help you finally loosen your tongue. Find a professional financial planner at sites like or"If I wanted to learn how to play the violin, I would get a tutor," says Lannerd. "The same thing with talking about money: I really needed to someone to help coach me through this."Once I actually started talking about it, I realized it's not as scary a subject as I thought."