CEC REGIONAL UPDATE 30 SEPTEMBER 2020 - CEC Government ...
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CEC REGIONAL UPDATE 30 SEPTEMBER 2020
Table of Contents
BULGARIA ........................................................................................................................... 3
CROATIA ............................................................................................................................. 4
CZECHIA ............................................................................................................................. 6
HUNGARY ........................................................................................................................... 8
POLAND .............................................................................................................................. 9
ROMANIA .......................................................................................................................... 10
SLOVAKIA.......................................................................................................................... 12
2BULGARIA
(prepared by the CEC Government Relations office in Sofia)
COVID-19:
• 20 271 total cases, 5 125 active cases, 14 339 recovered, 807 fatalities (as of September
29)
• Epidemic state of emergency until 30 November
Business and economy: (key economic or business developments)
• In case of exceptional circumstances, the budget deficit may exceed the threshold set at 3%
GDP, a draft of Bulgaria’s Ministry of Finance reads. According to the proposal, the
expenditures made with EU financing, including national co-financing, should not be included
in the budget deficit. The proposal also reads that unspent funds can be used to implement
other priority policies.
• Retirees will receive additional 50 leva (EUR 25.56) each month for the duration of the
pandemic. Pensions will then be indexed. According to the initial decision of the government,
the sum was to be given in the months from July to September, as part of the social measures
against the consequences of the pandemic.
• The banking system has not been directly hit by the coronavirus crisis. At the moment it is
stable and there is no increase in interest rates on loans, banker Levon Hampartzoumian
claims. Comparing the current financial crisis with the one that occurred ten years ago, he
said that the previous one was mainly a crisis of liquidity and mistrust between banks and a
lack of sufficient capital in the banks themselves.
• Nearly 550,000 Bulgarians chose the local sea resorts for their vacation this summer. This is
an undeniable success which is due to the professionalism of the business and the strict
compliance with the anti-pandemic measures, the country’s Minister of Tourism Mariana
Nikolova said. In Minister Nikolova’s words, the number of tourists increased by 20% in some
resorts situated along the Southern Black Sea coast. The tourism sector will count on
Bulgarians to choose Bulgarian winter resorts in the coming months and support Bulgaria’s
tourism amidst the coronavirus pandemic.
Politics and legislation:
• The start of the autumn political season in Bulgaria on September 2 with a sitting of the MPs
from the 44th National Assembly, was accompanied by strong public discontent and
increased police presence. Citizens protesting against the government, demanding the
resignation of the Prime Minister and Chief Prosecutor, staged a large-scale operation called
the Grand National Uprising. There were escalating tensions, clashes between
demonstrators and police, injured and detained.
• The embassy of the Russian Federation in Bulgaria has been notified of Bulgaria's decision
to declare two Russian diplomats as persona non grata. The reason for the decision is that
Bulgaria's Foreign Ministry received a letter from the Bulgarian Prosecutor's Office with a
decree suspending pre-trial proceedings against the two diplomats who have collected
information constituting a state secret for the purpose of revealing it to a foreign state. The
pre-trial proceedings against the Russian citizens have been suspended as a result
of diplomatic immunity.
3CROATIA
(prepared by CEC's Croatian partner - Vlahovic Group)
COVID19:
• After a spike in new cases during the tourist season in August, there has been a continuous
decrease in the number of active cases since 31 August. According to the data from the
European Center for Disease Prevention and Control, Croatia has 64.7 active cases per
100,000 in the last 14 days, which ranks in 17 out of 31 EU/EEA + UK countries. A month
ago Croatia was ranked third and since then the number of active cases has decreased by
more than one third. PM Plenkovic defined the country’s strategy of tourism opening as a
“calculated risk”.
• For patients with mild or moderate symptoms, isolation is shortened from 14 days to 10 days
while self-isolation remains at 14 days. The Croatian chief epidemiologist Krunoslav Capak
said that he believes 400,000 people in Croatia (less than 10% of the total population) had
been exposed to the coronavirus, which is considered not enough to achieve “herd immunity”.
This could be achieved in the middle of 2021 when more than 50% of the population were in
contact with the virus, said Capak.
• The Constitutional Court ruled on the decisions of the Civil Protection Directorate that the
Directorate, with one exception, had not violated anyone's constitutional rights. The only
decision that was not in accordance with the Constitution, according to the court, was
the temporary ban on working on Sundays, which lasted for a month.
Business and economy:
• The Croatian National Bank Governor Vujcic told that the country’s GDP could fall by around
8% this year, compared to an estimated 9.7% contraction the bank forecasted in July. Vujcic
also said Croatia’s economy is expected to rebound by 6% next year but warned it would not
reach the pre-coronavirus level before 2023.
• The government has been resuming the acquisition of fighter jets. Four countries submitted
bids for the Croatian Defense Ministry's tender. The U.S. is offering new F-16 block 70's,
Sweden's bid is for 12 new Gripens, France's bid is for used Rafales, while Israel is offering
used F-16 Block 30's. The government will decide on it in December.
• Croatia’s largest solar power plant was opened on the island of Vis. The project cost EUR
4.1 million and is the first of seven solar plants the Croatian national energy company HEP
plans to launch this year as part of its four-year, EUR 100 million investment cycle into
sustainable energy sources. The 3.5 MW plant will produce around 5 million kWh of power,
enough to meet the demands of 1,600 households.
• Standard & Poor's has reaffirmed Croatia's credit rating of BBB-, with a stable outlook. They
estimate that the economy will shrink by 8% this year, which is a better estimate than in May
when a 9% decline was projected. The government and economic experts consider this to
be good news, while President Milanovic believes that the ratings of agencies are a thing of
the past.
Politics and legislation:
• The U.S. Secretary of State Mike Pompeo is visiting Croatia on Friday to meet with PM
Plenkovic and MFA Gordan Grlic Radman. Topics to be discussed include the avoidance of
double taxation and visas, the situation in the region, US-EU relations, other global issues,
and Croats living in the U.S. as links to economic co-operation, said PM Plenkovic. Grlic
Radman did not want to say what position Croatia would take on China's 5G technology and
whether Croatia would sign with the U.S. a joint declaration on 5G security, but he said that
it would be discussed.
4• Minister of Labour Josip Aladrovic recently announced that the Labour Law needs to be
amended due to the fact that „Work from home“ (Home office) is neither defined nor regulated
by the law. Also, the Minister pointed out that the aim is to find a balance between employee
protection and flexibility for employers due to too many fixed-term contracts.
• The government announced that it will propose non-working Sundays for the trade sector,
confirming that a law is being prepared that will regulate work on Sundays, considering the
balance between work, rest and spending time with family.
5CZECHIA
(prepared by the CEC Government Relations office in Prague)
Status of the epidemic:
• 33 466 active cases, 618 deceased (as of September 29)
• Due to the spike in the infected cases, the government decided to reintroduce measures
covering mandatory face masks, limited public gatherings and strengthening testing
capacities. Despite the efforts, the epidemic status escalated on September 18, when the
number of new cases surpassed 3 thousand a day.
• With the rapidly worsening COVID-19 situation, the government decided to reintroduce the
Crisis Management Staff (CMS) starting on September 21. Despite the initial refusal to
reinstate the unit, PM Babis subsequently changed his mind due to the rising pressure of the
junior coalition partner the Social Democrats (CSSD) and regional governors, many of whom
were from his party. The governors called for better cooperation and communication between
the Health Ministry and the regions, which should be ensured by the central leadership of the
CMS headed by the Deputy Prime Minister and Minister of the Interior Jan Hamacek
(CSSD).
• The Ministry of Health continuously updates the traffic light map of the European countries
based on the pandemic situation. Currently, the map shows all countries in green, indicating
a low risk of COVID-19 infection, with the exception of Spain, which is marked as a red area
with a high risk of contracting the coronavirus. The Ministry has also launched an online
questionnaire for people coming to Czechia after spending at least 12 hours in countries not
listed as safe. Vice versa, other European countries also reflected the development of the
pandemic situation in Czechia and a significant number of them added Czechia or its part on
the list of high-risk areas. Following countries are currently restricting the arrival from Czechia
with a mandatory negative test or quarantine: Germany, Slovakia, Belgium (considers Prague
as red), Denmark, Estonia, Finland, Ireland, Cyprus, Lithuania, Latvia, Hungary, Malta,
Netherlands, Norway, Greece, Slovenia, Switzerland and the UK.
Business and economy:
• The Government has announced several economic reforms which aim to help recovery from
the economic slump caused by the pandemic. The government aims to abolish the so-called
‘super-gross wage’, and replace it with two income tax rates, 15% and 23%. This would cost
the state budget around CZK 74 billion (EUR 3 billion). Minister of Finance Alena Schillerova
(for ANO) said that this step was a long-term investment, which would negatively impact the
state budget, nevertheless, it would leave more money in people's pockets. The opposition
welcomes this move, but the economists say that the Czech economy needs more dramatic
reforms. Economic experts argue that Czechia is at the 7th worst place in the EU when
comparing the amount an employer contributes to the state on behalf of his employees and
what amount the employees actually receive at the end of the month.
• Another debated government intention is the so-called “rouškovné” (face mask
compensation) for the elderly. The coalition agreed on an amount of CZK 5,000 (EUR 190),
which would be a one-time benefit to the Czech elderly as compensation for stressful
situations during the pandemic. This benefit will have an impact on the budget, which is
estimated at CZK 15 billion (EUR 570 million). Despite the criticism from the opposition
parties, the government draft has passed through the first reading in mid-September.
Politics and legislation:
• Due to the rising criticism of the current pandemic management, Minister of Health Adam
Vojtech (for ANO) announced his resignation on the morning of September 21. On the same
6day, President Milos Zeman appointed his successor, former Deputy Health Minister, Roman
Prymula. As the chief epidemiologist, Mr Prymula was one of the key figures behind handling
the first wave of the COVID-19 pandemic in the spring of 2020, however, in May, he decided
to step down and take a role of the new government commissioner for medical science and
research. On September 22, on his first day in the office, Roman Prymula warned that in
case the pandemic situation deteriorates, the primary and lower-secondary schools might
get closed, outdoor public events might get limited from 100 to 50 people and the closing
hours of restaurants and bars might be limited up to 10 PM. The new Health Minister also did
not rule out minor personnel changes at the Ministry. The cabinet currently debates the
reintroduction of the emergency state. The decision should be made on September 30.
• In early September days, prior to the COVID-19 second wave, Speaker of the Czech Senate
Milos Vystrcil (ODS) visited Taiwan. This was criticized by President Milos Zeman and was
not supported by the Minister of Foreign Affairs Tomas Petricek (CSSD). Despite Chinese
pressure, Vystrcil gathered 90 businessmen, academics and politicians, including the Mayor
of Prague Zdenek Hrib (Pirates). Mr Vystrcil held a speech in the Taiwanese parliament,
where he emphasized principles of freedom and civil liberties. The People's Republic of
China firmly expressed its strong opposition to the visit. In response, the Czech Foreign
Ministry summoned the Chinese ambassador to explain the comment, which according to
the Czech side “crossed the line” of conventional diplomacy. It is noteworthy that German
Foreign Affairs Minister, Heiko Maas (SPD) warned Wang against making "threats” towards
European allies at their Berlin meeting, which took place the same day as Vystrcil's speech.
Moreover, Slovak President Zuzana Caputova stated that such threats were unacceptable
and that Slovakia stood alongside Czechia.
7HUNGARY
(prepared by the CEC Government Relations office in Budapest)
COVID-19
• The number of confirmed people infected with coronavirus in Hungary now stands at 24,014.
In compulsory home quarantine: 24,538. Recovered: 5,141. Deceased: 736. Total number of
active cases is 18,137.
Business and economy:
• The Hungarian National Bank (MNB) forecasts an economic downturn of 5.1-6.8% and
inflation of 3.5-3.6% for the remaining time of 2020. Next year's growth is expected to be 4.4-
6.8% with an inflation rate of 3.4-3.6%. GDP growth by 2022 could be around 4.5-5.7%.
Maintaining price stability and improving the purchasing power of wages are the most
important goals of the next period. Oil prices will be decisive for the rate of inflation, while
employment figures are expected to bottom out in early 2021, with unemployment briefly
exceeding 5% before dropping to 4% in 2022.
Politics and legislation:
• The Prime Minister's essay on challenges of the upcoming time period, focused on
the ideological transformation, the present and future of the EU, the coronavirus, and the
2022 elections. When comparing liberalism and conservative Christian democracy, Orban
suggests that the assumption that democracy can only be liberal is wrong, as it is evidenced
by an increasing number of political thinkers arguing to the contrary today. Regarding the
EU, he stated that the East and West will remain united as a historical region, but will become
increasingly distant from one another culturally, as Central Europe's position on migration
and cultural identity is clearly different from that of the West. In terms of domestic issues, he
wrote that while the second wave of the coronavirus is a challenge, Hungary isn't going to be
put on hold again and that people can count on the healthcare system.
• Reporting on the decisions made at the government's meeting, Viktor Orbán said that in
response to the epidemic, the closing time for nightclubs would be 11 pm and that the
coronavirus PCR test was now available at a set price of HUF 19 500. The cabinet has also
decided to maintain entry restrictions at Hungary's borders. Wearing a mask on public
transport, in shops, cinemas, theatres, healthcare and community care institutions and
customer service centres will be mandatory, and the total ban on visits to hospitals and
nursing homes will be extended. As of October 1, students and teachers will be allowed to
enter school premises only after having their body temperature checked. Citing
epidemiologists, Orbán explained that the second wave of the coronavirus will peak around
December-January, and until then the continuous defence is needed. The Economic
Protection Task Force has decided to extend the loan moratorium by 6 months in the case
of selected social groups such as families raising children, pensioners, the unemployed and
community workers. Businesses that have suffered a 25% drop in revenue recently can also
take advantage of the opportunity.
• Katalin Novák becomes minister without portfolio: Current Secretary of State for Family
and Youth Affairs has been appointed minister without portfolio for family affairs as of 1
October. The goal is to protect the living standards of families, therefore PM Orbán decided
to enhance the competences of Novák.
8POLAND
(prepared by the CEC Government Relations office in Warsaw)
COVID-19:
• As of 29 September, 2 483 fatalities resulting from the coronavirus were reported in
Poland. 89 962 patients were officially reported as infected by the coronavirus.
• Due to the rising level of infection per day, the government plans to issue new restrictions in
the green, yellow and red zones. Mass gatherings e.g. weddings will be limited to 100 people
in the green zone, 75 in yellow zones, and 50 in red zones. In yellow and red zones, the
obligation to wear masks will be extended to outdoor public areas. Bars and restaurants in
red zones will also have to close by 10 pm.
Business and economy:
• According to calculations of the Finance Ministry, Poland will have one of the smallest
recession in the EU, with a 3.5% GDP drop by the end of this year. Poland is also below the
EU average in terms of public debt in relation to GDP. According to EU methodology, it
amounts to GDP 61.9%. In 2021, the government assumes a deficit of PLN 82.3 billion.
• The government announced planned changes to taxes. Firstly, the so-called Estonian CIT,
which becomes available to entrepreneurs as of 1 January 2021, will be extended. Initially,
the government assumed a turnover cap of PLN 50 million - the Estonian CIT would now be
available to businesses with a turnover up to PLN 100 million. Similarly, the government will
raise the turnover cap for businesses paying Personal Income Tax from EUR 250 thousand
to EUR 2 million. Also, the 9% CIT rate will be extended to companies with a turnover not
exceeding EUR 2 million instead of the previous EUR 1.2 million.
• The government is currently planning the introduction of new measures aimed at attracting
foreign investments to Poland and supporting the expansion of Polish firms abroad. While
details are still being developed, the package is supposed to be based on four pillars: the
return of Polish capital to Poland; support for foreign investors; tax reliefs; and promoting the
employment of highly skilled workers.
Politics and legislation:
• Despite a recent crisis in the ruling United Right coalition, the party's have renewed their
agreement. Details of the agreement have not been divulged, however, it includes plans for
the reduction of ministries, upcoming regulatory plans, as well as a pledge to stand together
in the next local, general and European elections. A government reshuffle will take place in
the coming days. A major overhaul is not expected, however, the number of ministries will
likely be reduced from 20 to 14. Remaining ministries will take over the portfolios of those
dissolved. One of the biggest anticipated changes is PiS leader Jarosław Kaczyński entering
the government as Deputy PM.
9ROMANIA
(prepared by CEC's Romanian partner - Serban & Musneci Associates)
COVID19:
• COVID-19 cases still high at over 1500 new cases/day: Over the past month, the number of
daily new cases rose to an average of 1500. Overall, there are 125,414 cases of COVID-19
reported in Romania since the start of the pandemic.
Business and economy:
• Romania's reclassification to Secondary Emerging market: FTSE Russell decision
comes as a result of the formal screening process that included the collection of information
from public institutions and the Bucharest Stock Exchange, along with the calibration of
information received versus the perception of institutional investors already trading on the
local market. According to the representatives of the Romanian Association of Banks (ARB),
the reclassification of the Romanian capital market to Secondary Emerging market status
could attract new investments to the Bucharest Stock Exchange (BVB) from specialized
investment funds on emerging markets. ASF’s Nicu Marcu sees BVB’s leap forward as a
stepping stone for Romania becoming a regional hub, asking for the state’s direct
involvement. Finance Minister Cîțu concluded that Romania is ‘one click away’ from billions
of euros.
• Senate, Chamber in Joint Sitting passed budget adjustment: The two legislative
bodies passed on September 22 the Draft Budget Adjustment. The Budget Adjustment Bill
included PSD’s amendments on increasing the pensions by 40% instead of the 14%
proposed by the government. Finance Minister Cîțu labelled PSD’s action as “criminal”.
“What they are doing in a difficult period for Romania, in a period of global economic crisis,
is like an act of aggression to the economic stability of Romania, and they are using their
majority in Parliament,” said Minister Cîțu, adding that the government will refer the Bill to the
Constitutional Court. Minister Cițu’s position was backed by President Iohannis, PM Orban,
as well as by the main business representative bodies.
• The Central Bank expects the deficit to go up after the budget adjustment is
passed: The Central Bank informs that an increase of the pension point by 40% would lead
to an increase of the budget deficit to over 11% of GDP next year. According to the analysis
report of the Central Bank, Romania should avoid the increase, precisely because the
economy would destabilize even more. Financial markets would not accept high levels of
the budget deficit for a long time, which would make it difficult for the economy to recover.
• Minister Cîțu denies raising taxes: The Minister of Public Finance, Florin Cîţu denied that
the PNL Government would cut the salaries of the public servants and specified that a liberal
government means lower and less taxes that everyone has to pay. Florin Cîţu emphasized
that the current government has eliminated a series of taxes introduced by the former
government.
Politics and legislation:
• Result of the September 27 local elections: The one-round of Romanian local elections
took place on Sunday 27 September 2020. Romanian voters elected their Mayors and Local
Councils, as well as the President of the County Council and County Councils. The results of
these elections are a clear victory for the centre-right wing electoral alliance between PNL
and USR. Whereas the Social Democrats won 28 County Councils in 2016, four years later
they won only 20. The National Liberals went from 8 County Councils in 2016 to 17 in these
elections. The other regional powerhouse, UDMR went from 5 County Councils in 2016 to 4
after losing Bihor County to PNL. While USR-PLUS won no County Council, they won major
City Halls, most notably in Bucharest, Brasov and Timisoara. This power rearrangement is
10likely to boost PNL and USR-PLUS’ in the race for parliament and in the creation of a new
parliamentary majority after December 2020. This situation would offer a higher alignment
between the President, Government, Local Administration and Parliament and is also an
indicator of the expected continuation of the PNL government after December. The following
months are a going to put the PNL – USR-PLUS relationship to a test.
11SLOVAKIA
(prepared by the CEC Government Relations office in Bratislava)
COVID19:
• 450,501 tested (+134,647); 9,574 infected (+6,122); 45 deceased (+12); 4,329 recovered
(+2,162); 7-day moving median of infected people: 360 (+280) (since 25 August)
• The epidemiological situation is currently seen as bad and likely to be worsening. Regional
health authorities have the power to determine their respective region’s situation and
subsequently choose the package of measures aimed at curbing disease spread
• Central Crisis Staff adopted more stringent measures as of 1 October. Mass events are
cancelled unless everyone has got negative COVID test. Restaurants and bars can be
opened only until 10 pm and shops will have to limit the number of customers to one per 10
square meters. Face masks have to be worn also in exterior if people are closer than 2
meters. The government will also consider adopting an emergency situation on 30
September to facilitate procurement of tests and protection gear.
Business and economy:
• Real GDP in Slovakia experienced its biggest fall ever at 12.1% year on year
• Unemployment has decreased during the last month to about 7.6%
• Prices were higher on a year-on-year basis by 1.4% in August. The average annual inflation
rate for the past twelve months was 2.5%
Politics and legislation:
• As of 25 September, Croatia, France, Spain, Netherlands, Belgium, Malta, and Czechia are
now among countries that are considered risky. Passengers arriving from these destinations
should present themselves with a negative RT-PCR test result which is no older than 72
hours or go into quarantine. Ministry of Foreign and European Affairs also extended the list
of high-risk foreign regions in “safe countries“. Still, the Central Crisis Staff has approved
lifting the blanket ban on flights on 7 September, subject to strict anti-epidemiological
measures – it will enable flights from Russia, Ukraine, Northern Macedonia, the United Arab
Emirates, and Serbia.
• The Reform Plan to be financed from the EU Recovery Fund remains still unpublished.
Nevertheless, reforms are planned in eight areas: fiscal policy, green economy, labour
market, education, science and innovations, healthcare, public administration, and
digitisation. Coalition leaders will pick the final list of reforms.
• Taxpayers not able to file their tax returns due to the COVID-19 pandemic will have to file
their tax return and pay their taxes by 2 November.
• The government prolonged temporary protection of businesses against bankruptcy until the
end of the year.
• The financial contributions for companies and the self-employed to maintain employment will
be paid until the end of the year, the government decided. It is estimated that another
extension will swallow €198 million. It should also be prolonged for the whole year 2021 and
then be replaced with short-time work (Kurzarbeit) as of 1 January 2022.
• Prime Minister Igor Matovic began to speak about merging the collection of health and social
insurance premiums into a single social-health levy. In addition to simplifying the collection
of premiums, this would probably mean the end of private health insurance companies.
Coalition parties expect that the first theoretical model of functioning of a single social and
health insurance company could emerge by the end of the year.
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