Auhtor: Tomáš Plhoň
Source: Ekonom, 19 March 2009, no., p.

superior title: GOVERNMENT BONDS

The households should lend up to 140 billion to the government in future. This was announced by Miroslav Kalousek, Minister of Finance. The new issue of government bonds should be focused on households, being a profitable deal with guaranteed revenue for them.
“Simply, this will be a guaranteed annual interest – favourable when compared with those offered by banks, on the other had, it cannot be a loss for the government. The principal sum will be guaranteed as well. The bonds will be issued for fixed time, say, five or ten years, however, they people will be free to sell it back to the government for nominal value within this period of time,“ said Minister in his interview with MF Dnes.

Return to practice prior to World War II
In current situation, this plan is aimed to be one of the measures against financial crisis. It will be of help for the government in current hard times, on the other hand, it has been standard economic tool worldwide. This is what Pavel Makovec, Arca Capital, and also chairman of the expert committee liable for drawing this plan for the government to issue the bonds says.
“I have been trying to implement similar measures for as much as fifteen years, however, it was not possible until now. This aim has not been in line with economic interests of banks and, probably, there never has been sufficient lobbing to push it through. However, the one who would be against this plan now, would go against the interests of the government and the population,” says Makovec.
He also added an absolute majority of households had a part of financial resources invested in government bonds in pre-World War II Czechoslovakia. “At that time, every grandma knew it was good to put money into bonds, since this was an investment with the minimum risk and guaranteed income.”

The rate of interests is in the air so far
Either Pavel Makovec or the Ministry are not clear about the rate of interests on bonds. In a TV programme, Minister Kalousek only granted guaranteed interests could be up to three-four per cent. Even this percentage is more than many banks in Czechia offer to their clients.
In Western countries, it is pretty normal the households hold about ten per cent of the national debt. In Czechia, it would mean a sum slightly over one hundred billions.
“This is our goal to reach within next three – five years,“ Makovec added.