for the euro - Mladá fronta

Modern economic theory
owes a great debt to deceased
schizophrenic mathematical
genius John Nash
profile pages 10–11
Tiger tourists
74
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A brilliant madness
Monday, 8 June 2015
Big spenders from China set
their eyes on Prague after
devouring Paris
feature pages 12–13
No love lost
Photo: Reuters
for the euro
Citizens of the Czech
Republic find the idea of
using a single European
currency about as appealing
as that of accepting
boatloads of African and
Middle Eastern refugees
Miroslav Zámečník
T
he Czech Republic
pledged to switch over
to the euro twelve years
ago when it joined the
European Union. Yet there is still
not a single political party or movement willing to invest any real
political capital in promoting the
adoption of the single currency.
That leaves only President Miloš
Zeman, constitutionally devoid
of actual responsibility on this
matter, to speak up for as early
adoption of the euro as possible.
However, he is strikingly alone in
this particular endeavour. The rest
of the nation seems to consider the
idea of using the single currency
in its everyday shopping about
as appealing as that of accepting
boatloads of African and Middle
Eastern refugees.
The euro was launched not only
as a politically ambitious project,
but also as a highly prestigious one.
Applicants are required to meet
specific criteria (which some achieved by rather creative accounting
and a host of other tricks) and to
maintain a stable exchange rate of
the domestic currency with minimal fluctuations for two years.
Continues on page 8
2/3
news
Stropnický replaces key deputies
Igor Záruba’s notebook
ODS: The defence ministry is in the middle of a damaging period of upheaval
More changes.
Defence minister
Martin Stropnický
(left) gives his
reasons for staffing
changes at the
ministry. Standing
next to him is Czech
Military Police
chief Pavel Kříž and
Pavel Beran, deputy
for economic and
property affairs
Roman Molík, brought in by
Borovec, is also out as deputy
for economic (budgetary) and
property affairs. “I must be
certain I can rely one-hundred percent on such a person,” explained Stropnický.
“I wanted to have a stronger
player in place at this post.”
Replacing Molík will be Pavel
Beran from state-owned firm
LOM Praha.
According to Civic Democrat MP Jana Černochová,
Stropnický’s staffing policies
are little short of chaotic.
“How is it possible that in less
than 18 months, such key posts
as the deputy for armament,
and deputy for economics
have been replaced four times
already?” asked Černochová.
“Meanwhile, procurements
are frozen, army warehouses
Procurements are frozen,
army warehouses are
empty, and last year’s
budget increases were
only on paper, because so
far, soldiers have seen no
tangible improvements
in their conditions, says
Jana Černochová (Civic
Democrat)
are strikingly empty, and last
year’s budget increases were
actually only on paper, because so far, soldiers have seen
no tangible improvements in
their conditions.”
Photo: Reuters
Roll-ups
costing state
millions
Photo: ČTK
A
fter 14 months in charge of the Czech Ministry of Defence, Martin
Stropnický (ANO) has once
again shuffled the deck with
regards to his senior staff.
The shake-up will yield the
third deputy for armament
since 2014. Also replaced
is the deputy for economic
affairs, as well as the deputy
for defence policy and strategy. The opposition Civic
Democrats have denounced
the endless staffing changes
at the ministry.
Even though Czech civil
service law permits the appointment of up to two political
deputies, the Czech Ministry
of Defence will now have none.
The reason is that ANO’s Social Democrat (ČSSD) coalition partners sought a deputy
at the ministry responsible
for a specific portfolio. Stropnický has emphasised that
no top bureaucrats serving at
the ministry are members of
Andrej Babiš’s ANO party.
The changes follow the
already announced departure of former ČEZ staffer
Jiří Borovec as first deputy
at Defence. Surprisingly,
David Vagaday
Czech finance minister Andrej
Babiš has dismissed a study released by the Politics and Society Institute (IPPS) – an organisation founded by himself.
The IPPS released a study on
excise taxes, which warns that
lower taxation of loose rolling
tobacco is yielding the Czech
treasury 50 percent less in tax
revenues than per a standard
cigarette.
"The current state of taxation
is disadvantaging producers of
cigarettes," states the study.
If the ministry corrected this
imbalance, says the institute,
the state would gain hundreds
of millions in extra revenues.
Football
earthquake
Four days after his re-election
for a fifth term as president of
FIFA, Sepp Blatter announced
he is to step down from his
post. The news comes a
week after fresh corruption
allegations led to the arrest
of several top FIFA officials in
Zurich following a US Justice
Department request. Blatter
will remain in his post until a
successor is elected
The right to smoky air
Photo: Tomáš Novák
Electra
A restored Lockheed Electra 10A, once belonging to shoe manufacturer Jan Antonín Baťa, landed
in Prague’s small private Točná Airport at the end of May following a 9,700 km journey across
the Atlantic. The twin engine plane, built in 1937, was used for transportation and training in
Canada during WWII. Six years ago, it was purchased by Seznam.cz owner Ivo Lukačovič. Following
extensive renovation in the US, the plane undertook an eight day trip starting in Toronto, via
Greenland, Iceland, the UK, and finally to the Czech Republic.
Self-praise wins no points
for PM Sobotka
When Prime Minister Bohuslav
Sobotka (Social Democrat) boasted about government achievements at a recent Chamber of
Commerce gathering, entrepreneurs in attendance were less
than enthused. “One of the government’s objectives has been
to improve the competitiveness
of the Czech Republic,” said Sobotka. “The country has moved
up from 33rd place to 29th in
this year’s global competitiveness ranking assembled by the
prestigious [Swiss] IMD business
school.” However, a few minutes
later, Jaroslav Hanák, head of the
Confederation of Industry of the
Czech Republic (SPČR), told the
PM that the Czech Republic’s
competitiveness rankings were
a disgrace.
Along with trade and industry minister Jan Mládek, Sobotka fared no better when praising the government for having
accelerated economic growth
and reducing unemployment.
“Such growth is mainly down
to efforts by entrepreneurs
The government has approved a clampdown on smokers
devised by health minister
Svatopluk Němeček, it will
come into force next January.
The move, which includes a
ban on smoking in restaurants, is hardly a bolt from
the blue – the trend across
the world is very much in this
direction. It was only a matter
of time until the Czech Republic boarded the train, too.
Countries which have banned
smoking in public places have
reaped dramatic public health
benefits. Fears that customers
would avoid pubs, bars and
restaurants have also proven
unfounded. But what about
offering smokers a fenced-off
area – inside or out – to indulge their habit? The current
Czech conception makes no
concessions in this regard.
Smoking areas outside places
of work also appear increasingly under threat. Back in
2011, New York even went
so far as to ban smoking in
outdoor public places such as
Times Square and thousands
of public parks. Conversely,
Germany and France enable
facilities to offer outdoor
seating where smoking is
permitted. Such concessions
require investments from
businesses, but also offer
compromise rather than rigid
bans. After all, smokers are
people too, and given the
tax revenues generated from
cigarette sales, perhaps some
degree of tolerance should be
considered.
Marian Hronek’s notebook
Love thy neighbour
Jan Stuchlík
Photo: ČTK
defence
Pavel Otto
Star-studded guest list. Politicians court business figures from
across the Czech Republic. Pictured are PM Bohuslav Sobotka
and President Miloš Zeman
and businesses,” Hanák countered.
Finance Minister Andrej Babiš, also in attendance, tried in
vain to convince the assembled
business reps of the government’s strenuous efforts aimed
at reducing the deficit. “This year’s budget deficit will be CZK
100bn and CZK 70bn next year.
In the first four months of this
year, the national debt decreased
by CZK 20bn,” argued Babiš.
A list of ten Chamber of
Commerce priorities for the
government included a call for
a significant reduction of the
public structural deficit.
French politician Marine
Le Pen, who inherited the
xenophobic and far-right
National Front party from
her father Jean-Marie, is
seeking to steer a somewhat more moderate
course. During a recent visit
to Egypt, Le Pen met not
only with Coptic Christians,
but also with local Muslim
representatives. However,
after her journey, the nationalist politician declared
that her hostile position on
migration to Europe from
Muslim countries remains
unchanged: “We cannot
welcome migrants to France. The only solution is to
protect them in their home
countries.” Yes – love thy
neighbour... Just don’t get
too close. But the forethought of the French politician
went further still, telling
her North African hosts
that: “We consider Egypt
a bastion that will defend
us.” Presumably from those
whom we are protecting
from afar. Such pearls of
wisdom really make our
world shine brightly.
E15 weekly, economic and business newsmagazine | www.e15.cz |
Tomáš Skřivánek, Euro E15 Division Director | Igor Záruba, Executive Editor,
[email protected]; Marian Hronek, Editor, [email protected] | Contacts: Zuzana Faltová,
Secretary | Call (+420) 225 276 461, | Postal address: Mezi Vodami 1952/9, 143 00
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4/5
business
Czech Republic facing milk crisis
NOSTALGIE
Prices of dairy products have collapsed to near cost of production
I
n recent weeks, supplies of
unsold dairy products have
begun to accumulate across
the EU, including in the Czech
Republic. At fault is last year’s
overproduction of milk, as well
as the ban introduced last August by Russia on numerous food
item imports from the EU.
Milk producers and farmers
are paying the price. Prices of
dairy products have collapsed
to near cost of production, and
farmers have been hit by the spiralling purchasing price of raw
milk. From last year’s CZK 10
per litre, the price has now fallen to the current seven crowns.
Producers have been pleading
for the state to intervene, and
responsive moves are now under
preparation at the Administration of State Material Reserves
[SSHR].
“All dairy farms are drowning in goods. The warehouses of [South Bohemian dairy
product producer] Madeta are
at historically high levels. We
have never had higher supplies
of consumer-ready products
than now,” Milan Teplý, head of
Madeta, told E15. The company
processes more than 1m litres of
raw milk per day – according to
Teplý, at present it is over-producing by 150,000 litres.
Madeta is presently increasing production of long-lasting
dried milk as a way to utilise excess milk. “But both [fresh and
dried] are being sold below cost
right now. This represents some
CZK 17m in monthly losses for
producers,” added Teplý.
“The entire sector is witnessing increased warehousing,
and we are no different,” says
Jiří Tvrdík, head of Mlékárna
Hlinsko dairy farm, part of the
Agrofert empire. “Dairy farms
across the entire EU are feeling
the impact. Commodity prices
began to fall last summer; at the
start of this year, the trend began
accelerating further.”
Miroslav Toman, head of the
Czech Agrarian Chamber (AK),
rang alarm bells over the current
situation at a recent forum held
in Žofín Palace: “If ministry-level
measures are not forthcoming,
then within three months we
Overproducing
by 150,000
litres.
The company
Madeta
processes more
than 1m litres
of raw milk per
day
Photo: Jan Hrouda
milk industry
Dušan Kütner
REZIDENCE BŘEVNOV
could see some very serious consequences.” Specific measures
demanded by milk producers
include increased purchasing
of milk products into state reserves, or an increase in the in-
tervention price at which milk
is obliged to be purchased by
emergency agencies.
But the Ministry of Agriculture says it has no plans at
present to intervene. “The situ-
ation in the Czech dairy sector
is serious, but I am not prepared to say that it is dramatic
or critical,” Minister Marian
Jurečka (KDU-ČSL) said at the
aforementioned forum.
22
Dramatic slump in
Czech exports to Russia
Photo: Profimedia
German industry supports the continuation of sanctions currently imposed against Russia by the
EU. So says Ulrich Grillo, head of the Federation of German Industry (BDI, pictured). “Long-term
adherence to international law is more important than short-term gain,” said Grillo
35.8%
is the Q1 2015 slump in
Czech firms’ exports to
Russia
the country,” warns Váradi,
“They need to restructure
their manufacturing sector.
If they face increased global
isolation, then future growth
will be tough.”
Manufacturing and export to Russia is being kept
alive even by strongly critical
countries such as the US. One
example of continued Czech
investment is Agrostroj, the
largest domestic producer of
farming technology. The firm
is set to build a new factory
in Russia.
a dve r t i s ing A150000825
Continued sanctions
Exports by Czech firms to
Russia fell 38.5 percent, to
around CZK 18bn, during
first quarter 2015, according
to newly available data. During the same period last year,
exported goods worth CZK
28bn headed to Russia.
However, the reason for
the decline is not only – as
one might expect – sanctions
pertaining the Ukrainian crisis, but also the expiration of
several crucial orders at the
end of 2014.
Yet, despite uncertain conditions, large Czech firms
are seeking to maintain a foothold in Russia. “The Russian market is functioning,
and is functioning very well,”
insists Petr Váradi, Technical Director of machine tool
maker Kovosvit MAS. “But
infrastructure is aging in

Štěpán Bruner
DRTINOVA
6/7
End of the line!
Jana Havligerová’s political diary
The conclusion
of the Nagyová
fiasco could be
that politicians
essentially
become
untouchable
Limitless chains of fools
which cited the MPs parliamentary immunity. The trio
received a public apology
from Justice Minister Robert
Pelikán (ANO) and are also
set to gain millions in compensation from the state.
Lawmakers now have a
strong case for making state
prosecutors bear greater responsibility for their actions.
But this could lead to politicians and other powerful people becoming untouchable and
above the law – something
that even the greatest critics
of Ištvan do not want. But justice in this country has been
Lawmakers now have a strong case for
making state prosecutors bear greater
responsibility for their actions. This could
lead to politicians and other powerful
figures rising above the law
declared that insufficient
evidence existed to find the
four guilty of abusing intelligence for political gain. It
would be very difficult for an
appeals court to reverse such
a finding. And so the Czech
public can be assured that
what occurred in June 2013
does not amount to an effective anti-corruption drive
by police and prosecutors,
but rather to a regular police
putsch cut from the cloth of
some banana republic. The
case surrounding Nagyová’s
resigned in disgrace on 29
May as soon as the verdict
was announced. A similar
fiasco surrounds the prosecution of former MPs Petr
Tluchoř, Marek Šnajdr and
Ivan Fuksa, accused of resigning in 2012 in exchange
for lucrative private sector
jobs – and thus helping the
troubled Nečas government
survive a no confidence vote.
Their subsequent prosecution – also pursued from
Olomouc – was stopped by
a High Court ruling in 2013,
tainted, and now prosecutors
can only wait for what our legislature intends to do about
this fact. Too late. Supreme
State Attorney Pavel Zeman
should have intervened to
reign in incompetent prosecutors. He, too, bears responsibility for placing yet
another roadblock in the path
of the Czech Republic slowly
building a functional judicial
system with norms and traditions similar to those of other,
more advanced, democratic
states.
ODS Chairman Petr Fiala
reckons things are “looking
sweet” for the party –
debts are being repaid,
prudent financial decisionmaking is occurring, and it
should even end up in the
black by year’s end. Great.
Now all you need is some
voters.
Meanwhile, 700
inhabitants of Prague’s
Dejvice and Bubeneč
quarters are suing
authorities for gastric
ailments caused by tap
water contaminated by
coliform bacteria and
noroviruses. Such water
was drunk by thousands
before the problem was
detected. Thank goodness
The government is failing the problem is being
to carry out investments,
fixed. Or is it? Dejvice
make savings, and
and Bubeneč authorities
conduct debt repayments
simply declared the water
in a period of relative
fit again for consumption.
economic prosperity.
The clever wording
President Zeman’s
avoided any mention of
personal Russia policy is
the water’s past state.
undermining our country’s Lines at trucks dispensing
security. Finance Minister
alternative drinking water
Andrej Babiš is clearly
remained in place when
abusing his power to help
the declaration was made.
his business interests.
Not long after, however,
The above sums up the
the trucks disappeared,
sentiments expressed
as has, evidently, any
at the Civic Democrat
responsibility for those
(ODS) party congress.
who caused this problem
Oh, and one more thing:
in the first place.
joke
ad ve r t is i ng A151005117
T
he recent acquittal of
Jana Nagyová Nečasová, the former mistress
and subsequent wife of ex-PM
Petr Nečas, and three Czech
Military Intelligence Service [VZ] aides must be viewed
as a disastrous fiasco for the
Olomouc state prosecutors
and the Czech police’s Organised Crime Unit. Ultimately,
the judge, Helena Králová,
alleged abuse of military intelligence was supposed to
be the clearest of the wrongdoings in the entire Nagyová
scandal. Initially, a prosecution was supposed to begin
within three months of her
arrest. Ultimately, the affair
dragged on for a year and
ended in a fizzle. The fact
that state prosecutors also
denounced, without any merit, three highly decorated
members of the military, is
simply a disgrace.
And Olomouc’s State High
Prosecutor Ivo Ištvan and
his entire team should have
A quartet of Czechs
–TOP 09 Chairman Karel
Schwarzenberg, party
Deputy Chair Marek
Ženíšek, Euro MP Jaromír
Štětina and former
European Commissioner
Štefan Füle – are
among the 89 European
politicians and members
of the military declared
persona non grata by
Russia last week. In a
self-declared act of “good
faith” Moscow handed
over the list of names to a
visiting EU delegation. It’s
a shame that such good
faith does not extend to
revealing the list of those
whom the Kremlin would
greet with open arms.

Photo: ČTK
Pavel
Páral
HUGO BOSS International Markets AG Phone +41 41 72 73 800 www.hugoboss.com
opinion
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8/9
cover story
Of course, a small and open economy
such as the Czech one is a perfect
example for traditional arguments
in favour of adopting the single currency: reduced transaction costs,
elimination of exchange rate risks
in trading with key business partners,
and with it improved conditions conducive to the growth of both trade and
investment. However, the gloriole of
the single currency and the weight
of economic arguments have always
been rather absent from the public
take on things.
The fact that the country is still
outside the eurozone is down to more
than the global crisis of 2008. Aversion to the single currency has deep
historical and psychological roots.
The nation’s collective consciousness
still vividly remembers the currency
of the First Republic. Czechoslovakia avoided a wave of inflation that
ripped through all the neighbouring
countries, while the Czech crown
remained strong. And the nation
still clings to this image of a stable
currency. It is not a conviction that
would necessarily have a sound base
in the real economy, yet strongly held
emotions prevail.
Czechoslovakia maintained the
strength of its currency even at the expense of a deepening economic recession and high rates of unemployment,
which persisted until February 1934.
Conversely, the monetary reform of
1953 is remembered as a detested
move by the communist government,
leading to long years of the crown
as a non-convertible currency. Even
Hungarian forints were rationed, and
travelling to Tito’s Yugoslavia required a special permit.
Following the introduction of limited convertibility in January 1991,
Czechs considered the temporary
fixed exchange rate to the German
mark as extortionate, but the rapid
growth of incomes eventually transformed Czech travellers, bringing
their own food abroad, into normalspending tourists. The continued
improvement of consumer comforts
abroad brought about by the gradually strengthening domestic currency
only reinforced the memory of the
pre-war crown as a safe haven.
Differing motivations
Each of the post-communist countries that have become a part of the
eurozone followed a very different
set of motives to that of the Czech
Republic. Slovenia, which ditched the
tolar in favour of the euro in 2007,
lacked any analogy to the pre-war
crown and there was no other benefit
to holding on to a currency devoid of
a sentimental value in a small country mainly trading with Austria and
Italy. For Slovakia, adopting the euro
was more or less the only reasonable
solution: the post-split Slovak crown
was viewed as a token of weakness unless it could match the Czech crown,
12-month average of HICP
(Harmonised Index of Consumer
Prices) inflation of no more than
1.5 percentage points above the
reference value obtained as the
average for three countries with
the lowest inflation rates
Government budget deficit
No more than 3 percent of GDP
Government debt-to-GDP
ratio
No more than 60 percent of GDP
Exchange rate stability
Pavel Páral
At least two years of participation
in ERM II (Exchange Rate
Mechanism) without a breach of
the ±15.0 percent fluctuation
range and without devaluation
of the central rate pegged to the
euro
Just one politician in the Czech Republic appears genuinely enthusiastic
about a speedy adoption of the euro
and that is President Miloš Zeman
Why should we strive to adopt the
euro as soon as possible?
For reasons similar to those of Slovakia where 70 percent of people are
content with the single currency. Plus
the fact that it would raise the credibility of our country and facilitate an
influx of new foreign investment. And
that is something foreign entrepreneurs have told me themselves.
Long-term interest rates
Yield on 10-year government
bonds should be no more than
2 percentage points above the
average for three countries with
the lowest HICP inflation
something that was achieved for only
a very short stretch of time. At the
time of the euro adoption one euro
was worth 30.126, Slovak crowns, well
below today’s exchange rate for the
Czech crown. This fact has faded from
memory to such a degree that even
President Zeman seems blissfully
unaware of it and continues promoting the adoption of the euro when the
currency is strong while criticising
the Czech National Bank (ČNB) for
its commitment to an exchange rate
of CZK 27 per euro.
Slovakia was followed by all three
Baltic states, for whom adopting the
single currency was viewed as a highly
sensible move. All of them entered the
euro camp in order to distance themselves from the Russian rouble. There
was nothing sentimental about the
decision – it was highly strategic and
pragmatic. Any other choice would
have proven costly, as the states found
out in 2008, when foreign capital drained from their economies leading
to immediate and drastic austerity
measures and a reduction in wages
and pensions.
Repulsive attraction
Greek crash test.
The single currency is enduring its greatest challenge yet as a result of the Greek
crisis. The Czech Republic should pay close attention before deciding to join the
eurozone club
Photo: archive
Continued from page 1
Price stability
The Czech Republic is very different
in this respect: there is hardly any
other country so closely linked to the
eurozone economically, yet so aversive to the idea of adopting the single
currency due to reasons of history
and emotion.
Photos: Reuters
No love lost
for the euro
The only
argument against
the euro is Greece
Euro
convergence criteria
It would be foolish to hope for any
sort of economic detachment from the
eurozone. The maximum difference
that diverted exports might achieve would be a couple of percentage
points. The Czech Republic cannot
reasonably afford to over-value the
crown in a way that would markedly
exceed the growth of wages, or labour
productivity, compared to Germany.
And so it must be stated: the expansion of the common market has
been an exceptional success for Europe. Of course, this does not fully
apply to peripheral counties, but this
description does not encompass the
Czech Republic, which has certainly
benefited, and will continue to benefit, from free trade, free movement of
capital, people and services.
On the other hand, there is no real
need to participate in an ambitious eurozone project, which has managed
to fuse together hitherto disparate
parties, now forced to reap the fruits
of such idealism. We were not there
when this process was initiated, and
the resultant sour fruits are not down
to our actions. The Czech Republic may
possess a natural affinity towards the
post-communist bloc, but it can hardly
be expected to bear any economic, moral and social responsibility for Greece.
This country must understand its place within the Balkans. Right now, the
Bulgarians or Romanians can hardly
be seen as much better at governance.
Nonetheless, Romania is presently a far
better investment target. If Greece does
eventually return to the drachma then
real wages will adjust very quickly in a
downwards direction, unless propped
by increased productivity. The same
will happen if Greece sticks with the
euro – only at a much slower pace.
This close link between labour productivity and wages should provide
some serious food for thought for Josef
Středula, head of the Czech-Moravian
Confederation of Trade Unions (ČMKOS), a vocal supporter of wages
catching up with those of Germany
and Austria. The fastest rate of wage
growth in history came about after the
reunification of Germany, when wages
in the new former East German fede-
There is no real need to participate
in an ambitious eurozone project,
which managed to fuse together
hitherto disparate parties, but is
now forced to reap the fruits of
such idealism. We were not there
when this process was initiated,
and the resultant sour fruits are
not down to our actions
ral states were adjusted to match those
in the west of the country, regardless
of actual productivity. Consequently,
most east German industry nosedived,
with considerable job losses. The former East Germany remains dependent
on subsidies from the west to this day.
Lacking a wealthy brother, Czech trade
unionists should take stock of labour
costs and productivity. Is Czech productivity higher than that in Germany or
Austria? A strengthening economy can
certainly lead to understandable calls
for higher pay, but excessive demands
are a clear path to trouble. Anyone
thinking otherwise has no place in a
currency union with a country such
as Germany.
What do you think would be the benefits, and the costs, for the Czech
Republic of adopting the single currency?
I have already mentioned the benefits. Where costs are concerned,
they would exist only if the eurozone
continued to fund Greece balancing
on the brink of bankruptcy. That is
what I consider the strongest argument against adopting the euro at
present.
What is your opinion of the current
institutional framework of the common currency and its development in
recent years?
I am of the opinion that the European Union is currently standing
on one economic leg – namely the
common currency – and it also needs
a joint fiscal and tax policy. It would
be impossible to keep standing on
one leg long-term without completing
such an institutional framework.
What should the government and the
Czech National Bank do?
Above all, they should explain both
the positive and negative aspects of
the single European currency, since public knowledge regarding the
euro is still quite low and the negative
stance shared by a majority of Czech
society stems, in my opinion, from a
fear of the unknown.
10/11
profile
The strange genius
of John Nash
T
he word “hacker” was invented by John Nash
some time in the 1950s. It was meant as an insult
directed at students who were cutting corners.
A “hack” is slang for someone who is not to be taken
seriously, while “to hack”, as a verb, is to cut and chop
with irregular blows and clear away. Ironically, in a
sense, the ultimate death of Nash was a kind of hack,
too. Evidence suggests, the mathematics mastermind
forgot to buckle up in a New Jersey taxi. It was a rather
unusual end to a rather unusual life
Lukáš Kovanda
Two lives were lost on the New Jersey
Turnpike on 23 May – those of both John
Nash, and his life-long love, wife Alice,
whom he married twice and divorced
once. They would die together, too, John
aged 86, and Alice, aged 82. And with
that, the world lost one of the greatest mathematical minds of the 20th century.
Nash versus Lennon
This author met Nash in the summer of
2011. We had quite a lengthy discussion
together at Princeton University, New
Jersey. It was a weekend, the campus
was empty, the lecture halls abandoned.
Silence. It was like in the 1960s, when
those very same halls were visited by
“The Phantom from Fine Hall”. Fine
Hall is home to Princeton’s Department
of Mathematics. It is here that the gaunt,
lanky, mathematics graduate would draw
an array of unusual messages on the blackboard. He was haunted by voices in his
head. From 1959 onwards, Nash’s
life began to fall apart as the
result of acute paranoid
schizophrenia.
But by this time, Nash already had
many achievements under his belt. In
1950, aged just 22, he was awarded a
Ph.D. In a recommendation letter for
graduate studies at Princeton, a former
teacher wrote simply: “This man is a genius”. Enough said. Generation-older
mathematicians could only simmer with
envy as Nash began to formulate solutions to some of the hitherto toughest mathematical problems in existence. Nash’s
discoveries often centred around “game
theory” – with contemporary applications spanning economics, evolutionary biology, accounting, politology, computing,
artificial intelligence and the military. The
genius became an instant star, and was
described by Fortune magazine in 1958 as
a shining light of “new mathematics”.
Fellow Nobel Prize winner
Robert Aumann, whom I
also had the chance to meet in
2011,
is convinced that during the 1960s
game theory helped to prevent World
War III, and with that global annihilation. As we talked, Aumann wrote
down a Latin adage: “Si vis pacem, para
bellum” – “If you want peace, prepare
for war”. But it wasn’t until the development of Nash’s game theories that such
a maxim gained a scientific basis, and
accompanying credibility reflective of
late-20th century thinking.
At first glance, theoretical game
theory modelling appears to create
counter-intuitive conclusions. Isn’t
the path to peace total disarmament? Such questions
were asked by the “flower
children” of the 1960s
along the lines of
John Lennon’s later
“Imagine”. The
answer proved
otherwise. Disarmament
is in practice unattainable, argued
Nash, Aumann and others. Peace, so
says their counter-intuitive conclusion, can more often be best achieved
through significant armament, including of the nuclear variety. “Nuclear
weapons serve as a deterrent,” says
Aumann. Such mutually assured
destruction maintains a stalemate,
kept in check by the simple concept
of fear. With that, geopolitical balance
is maintained. And so, the utopian
vision is actually the weaponised one,
with, conversely, unilateral concessions leading to the most bloodshed.
War and schizophrenia
But game theory has contributed to
far more than just the revision of old
adages about war. It also analyses the
state of play, in which the success of one
or the other player (or wider entities
such as companies and states) is based
upon the choices made by others. Thus,
it represents a discipline, which studies
a wide array of adversarial decisionmaking processes, in which conflicts
of interests can arise. Game theory
models try to not only analyse such
scenarios, but, through use of modelling and predictive mapping, to also
offer the best potential strategies for
specific players within conflicts.
In a specific form, focused on the
field of international relations, game
theory had advocates among President
John Kennedy’s inner circle (who faced
the ultimate standoff during the Cuban
Missile Crisis). Later, under President
John Forbes Nash Jr. (86)
» Born 13 June, 1928 in West Virginia; father an electrical engineer, mother
a teacher
» The parents strongly supported their son’s education, particularly in
mathematics; mother Virginia supplemented her son’s schooling at home,
and father John proudly bought his son several science books
» Of all the scientific fields, young John Nash initially did best in chemistry
but also began taking supplemental maths courses at Bluefield College;
awarded a scholarship at the Carnegie Institute of Technology, and
subsequently Princeton University
» Gained a Ph.D. in 1950 with a dissertation on “non-cooperative games”.
In 1994, the work was awarded the Nobel Memorial Prize in Economic
Sciences
» Married Alicia Esther Lopez-Harrison in 1957, an El Salvadorian graduate
of physics at the Massachusetts Institute of Technology (MIT)
» Resigned from the MIT Mathematics Faculty in 1959. Following
increasingly erratic behaviour, was involuntarily hospitalised in a Boston
psychiatric clinic, diagnosed with paranoid schizophrenia; divorced wife in
1963 – and remarried her in 2001
» Began his return to academic life in the 1980s. Thanks to e-mail, began
communicating with many noted mathematicians of the day. They were
delighted to reacquaint themselves with the “same old Nash” and found
that he still had many contributions to make to the field. One later
interest for Nash was the function of money in society
» The biographical book “A Beautiful Mind”, by author Sylvia Nasar, was
published in 1998; three years later it inspired a film of the same name
the Soviet Union. The details of this
were only published in the 1990s. Although other players such as Aumann,
have pushed the field forward, its pioneer was undoubtedly John Nash.
Paradoxically, global Armageddon
may have been prevented thanks to
Nash was unique in every
possible way. Even in how
he finally left the world
Richard Nixon, National Security Advisor,
and subsequent Secretary of State,
Henry Kissinger
was an adherent.
As was Herman
Kahn, a military strategist
and author of
the 1960 book
“On Thermonuclear War”
(he was also
an inspiration for Stanley Kubrick’s
satire “Dr.
Strangelove”
(1964)).
During the
1960s, game
theory played a
major role in the
US’s Cold War
approach to
Photo: Profimedia.cz
one man’s paranoid schizophrenia (one
early manifestation of the disease in
Nash was related to apparent communist conspiracies in the US). “It may be
true that a certain correlation exists
between the rejection of formal thought patterns and the ability to think in
an original and creative manner,” Nash
told me, adding: “I also think that my
scientific ideas would not have come to
the fore had I thought in a normal way.
After all, Albert Einstein was hardly
normal either. And Newton was an
acute neurotic.”
Not mad, but unique
More than half a century on from the
onset of schizophrenia, during our
conversation, the former “phantom”
Nash came across as eccentric rather than “mad”. During the 1980s,
the affects of Nash’s disease began
to notably fade. In 1994, the scientist
was awarded the Nobel Prize for Economics. In 2001, the mathematician
also married for a second time – to
the same wife he had divorced back
in 1953, Alicia Nash. Also in 2001,
the biographical movie “A Beautiful
Mind” (based on a 1998 book) starring
Russell Crowe as Nash, was released. It ultimately won four Academy
Awards.
“Now I, too, am 10 years older, my
health a little shakier, but my opinion
on that film remains the same,” Nash
told me. “It was a clever film. But not
exactly an objective biography. But I
suppose it has to be that way – in life,
far more happens than can fit into a
book or a movie.”
Nash, albeit indirectly, assuredly
played a central role contributing
towards world peace (or better put,
towards the prevention of World War
III). Asides from his Nobel Prize,
Nash was also awarded (with colleague Louis Nirenberg) the 2015 Abel
Prize – a kind of Nobel Prize for Mathematics. Indeed, it was on his journey home from collecting the award
in Norway, that the accident occurred
which ultimately ended Nash’s life.
In person, Nash had the aura of being somehow untouched by the very
achievements that had brought him
countless accolades. Slow steps, eccentric mannerisms, a wavering voice,
and a degree of shyness – hardly attributes one would associated with
success. But then summing up Nash
as a mere “success” is not worthy of
the man’s contributions. Nash was
unique in every possible way. Even in
how he finally left our world.
The author is the chief economist
at financial group Roklen
12/13
feature
Devoured by China’s
tiger tourists
B
ig on spending.
Big on luxury.
Paris has
become the dream
city for tourists from
the Middle Kingdom.
But now Prague, too,
is increasingly on the
radar for the eager
Chinese
Petr Horký
We sit in the McDonald’s on Wenceslas Square as Mr. Li places his tourist
guide accreditation card on the table.
Next to that he also places a card permitting him to operate a taxi service.
Li says the second card is far more
important. Because showing Chinese
tourists around Europe actually entails
countless hours spent behind the wheel.
“Very few people want to only see the
Czech Republic,” explains the Chinese
native in fairly decent Czech. Li, wearing a baseball cap on his head, looks
much younger than his 64 years.
Li Pao-Tcheng was born in Beijing,
but has lived in Prague for the last 20
years. Before he began guiding upper-middle class countrymen around
Europe, he worked as a textile trader.
But following the global economic
crisis of 2009, Li’s business hit the
rocks, and so he decided to become
a tour guide instead. He became acquainted with the field by guiding
friends of friends around for free. But
then, one day, a Chinese friend who
operated a travel agency offered him
a paid job as a tour guide.
Since that time, Li has successfully made a living in this endeavour,
and can today boast that he is one
of the most experienced tour guides
working in Prague. “I have contacts
for 150 travel agencies in my phone.
When one calls, I go to work.” Li isn’t
worried about work drying up, rather
the opposite – the numbers of Chinese
tourists visiting Europe continues to
increase, and should do so for some
time yet.
Paris, je t’aime
Last year, around 109 million Chinese
travelled outside of the country. By
2019, the annual figure is expected
to reach 174 million. Back in 2000,
the number was a mere 10 million.
The rise of the Chinese tourist serves
as a reflection of the increasing prosperity of the world’s most populous
nation. A similar wave of Japanese
tourists erupted around 30 years ago,
bringing with it stereotypes of Asian
tourists filming and photographing
absolutely everything .
Figures show that Chinese tourists
mostly travel around Asia; but Europe
has become the second most popular destination, with Paris the most
popular city. Last year, 2.2 million
Chinese visited the French capital.
In comparison: last year, 211,000
Chinese visited Prague – up a fifth
from the previous year. But the Czech
embassy in Beijing, and consulate in
Shanghai, only issued around 17,000
visas – meaning that most Chinese are
arriving elsewhere in the Schengen
zone of EU countries first. A new
Hainan Airlines direct flight is set to
change all that this autumn. But Li
is somewhat sceptical: “It will increase the numbers, but not by a huge
amount. For Chinese, it is still easier
to get a visa at the German or French
embassies. Getting a Czech visa is
harder. Even Hungarian or Austrian
visas are easier.”
Although Li lives in Prague, he is
equally at home in his trade in France, northern Italy, southern Croatia,
and Switzerland. Picking up the next
flock, for example, in Paris, is all part
of the job. In such a case, he heads
to France a day early, to be on the
safe side. The minibus trip takes 15
hours. He then waits a day by the river Seine for his customers to arrive.
Large groups of around 40 – meaning
budget groups who have purchased a
package holiday from a large travel
agent – are something Li now caters
to only on occasion. Most often, he
serves as guide to far smaller groups
of around eight people – enough to fit
in his minibus. After picking groups
up in Paris, Frankfurt or anywhere
else, he stays with them for between
8-12 days. During this time, a thorough European tour is provided.
But most common for Li is a tour
around Central Europe – starting in
Poland or Germany, and then traversing the Czech Republic, through to
Austria and Hungary. His tourists
spend roughly 2-4 days in the Czech
Republic. During that time, they either visit Prague alone, or traverse a
route taking in Prague, Karlovy Vary,
Pilsen, Český Krumlov, Kutná Hora
and back again. Presently, the Moravian capital Brno is off the itinerary.
“Then we go to Vienna, spending
four or five days in Austria; after that
three days in Hungary, and there it
ends,” relates Li. “But that is only an
example. Other groups can travel to
Germany. I go everywhere with my
customers. I must be familiar with
the histories of all these countries.
When we visit Schönbrunn Palace [in
Vienna], I must be able to explain who
Sisi, Franz Joseph, and Maria Theresa were. When not on these tours, I
spend each and every minute further
studying and educating myself.”
18,000 crowns per head
But Chinese visitors in Europe aren’t
simply interested in historical sightseeing. Indeed, the Chinese have
gained a reputation for unmatched
profligacy during their vacations –
beating even the excesses of the Russian upper-crust. Luxury brands are a
central target for such shoppers. For
one, such actions reflect a custom of
brining back expensive gifts from a
foreign trip. But at the same time,
luxury goods are far cheaper to purchase in Europe than in China. Last
year, Chinese tourists abroad spent
USD 165bn (CZK 4tn). Consequently, countries are rushing to attract
this extremely lucrative clientele.
And such steps can be achieved, for
example, by loosening visa requirements, or launching airline routes
connecting with the major Chinese
cities.
Undoubtedly, the Czech Republic
is among those countries vying for a
slice of the Chinese cake. Last year,
on average, each Chinese visitor spent
CZK 17,918 per capita, according to
data from Global Blue, a firm which
refunds VAT on purchases made by
Chinese in the Czech Republic. But
the reality on the ground is a little
different – not all purchases by visitors from China are declared. This
means, actual numbers are potentially
much higher.
As to what Chinese visitors purchase whilst in the country: a cursory
Chinese visitors to Europe aren’t
only interested in historical
sightseeing. They also want to
spend, spend, spend on luxury
goods and brands
walk around Prague’s Old Town will
provide the answer. Chinese tourists
are particularly interested in luxury brands such as Louis Vuitton or
Prada – such items are bought in the
upscale Pařížská boulevard. As for
specifically Czech products, the most
common are Czech crystal glass, or
precious stones such as moldavites
and garnets, which can be found in
stores on Karlová street or on Old
Town Square. Li also mentions the
Botanicus store, which sells natural
scented soaps.
Interestingly, Chinese abroad, while certainly sampling foreign cuisines,
still prefer to dine at local Chinese
restaurants, says Lin: “Of Czech food,
they like roast pork knuckle, duck
and goulash. They also like French
restaurants. But most of all Chinese
restaurants. In Prague, this includes a Shanghai-style establishment
in Anglická street, or a Chinese food
restaurant in Evropská. Though the
Chinese food here is different to that
Photos: Martin Pinkas
Minibus tour guide.
Li Pao-Tcheng has lived
in the Czech Republic for
20 years. His tour guide
duties involve picking up
arriving Chinese tourists
and guiding them across
the continent
Spendthrift vacationers. Czechs should certainly welcome Chinese tourists
with open arms. On average, last year, each Chinese visitor spent CZK 18,000 in
the country. Average visits to Prague were 2-4 days
at home. The visitors don’t find it to be
as good, but there is no other choice. I
don’t think they could survive on just
Czech food alone. But what they do
like a great deal is Czech beer.”
In terms of hotels, Chinese tourists
in Prague mostly prefer to stay in four
or five-star accommodation. Of the
latter, this includes the Hilton, and
of the former the Vysočany Clarion
or Duo in Prosek, says Li.
And no trip across Europe with Mr.
Li would be complete without a stop
at a huge outlet centre on the edge
of town. Alas, hard luck for Czech
shopkeepers, who apparently do not
stock the truly luxury labels sought
by Chinese tourists. And so Li mostly
takes his tourists to Metzingen near
Stuttgart, or to Berndorf near Vienna,
or to The Mall in Milan, or to Village
Outlet in Paris. If the current route
fails to pass by any of these locations,
or if clients expressly ask to shop in a
Czech outlet store, then Li takes them
to Fashion Arena in Štěrboholy on the
eastern edge of Prague.
When a group of tourists arrives in
Europark (the name of the shopping
centre at Štěrboholy), each tourist
receives a 10-percent discount card.
On average, Chinese tourists spend
around CZK 3,000 in Fashion Arena.
A special “Tourism Manager”, Alena Kudílková, is tasked solely with
attracting and satisfying the needs
of foreign shoppers. Hitherto, these
have mainly been Russians. But times
are changing. “Only recently have
we directed our efforts towards the
Chinese customer base,” says Kudílková. “They comprise around seven
percent of all foreign customers. But
that number is on the rise. It is an
interesting clientele. They arrive wellprepared. They know exactly what
brands they want, and what they
want to buy. The chief items bought
by Chinese here are shoes, handbags,
jewellery, and watches. Luxury items
and brands. In the future, we would
like to orient more towards these
upscale brands.” Compared to last
March, Fashion Arena saw a year-onyear 130 percent increase in Chinese
customers; during the first quarter
of this year, they spent 76 percent
more than during the same period in
2014. Fashion Arena is also seeking
to further aid Chinese shoppers by
expanding its acceptance of China
UnionPay credit cards.
14/15
wine & dine
society
society
RemembeR Vietnamese Food
Charity ride
Wednesday, June 3, saw the start of the sixth annual Bicycle Ride for
Children (Na kole dětem). The charity event began in the western town of
Aš. Led by professional cyclist Josef Zimovčák, participants will traverse the
Czech Republic. If all goes according to plan, by June 13, they will reach the
finishing line in Bruntál. Also along for the ride are renowned surgeons Jan
Pirk and Pavel Pafko, seven-times Czech badminton champion Petr Koukal,
car racer Karel Loprais, and three-times artistic cycling world champion
Martina Trnková. Insurer MetLife is serving as main sponsor, supporting the
charity’s Endowment Fund with a gift of CZK 250,000. Money collected as a
result of the ride will be used to help young cancer patients
Un‘pho’gettable
Photo: Dachser
The decor is
undistinguished
but the authentic
and well prepared
Vietnamese food
is worth going
back for
out to asia
Photo: Metlife
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tel.: 602 889 089
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A brilliant madness
Modern economic theory
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schizophrenic mathematical
genius John Nash
profile pages 10–11
Good Vietnamese
food at very fair
prices
Unattractive environs
and rather basic
service
Another popular order
here is Bun cha, grilled pork
belly with thin rice noodles
and a spicy homemade sweet
and sour dressing. The pork
belly is well done, crunchy in
places and accompanied by
chopped iceberg lettuce and
herbs.
The extensive menu also
runs to Thai and Chinese dishes as well as several vegetarian options priced at less than
CZK 120.
Tiger tourists
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74
starter than the restaurant’s
fresh spring rolls, which combine shrimp, chicken, rice noodles, vegetables, and herbs in
a wrap of translucent rice paper. The latter look appetising
on the plate but are otherwise
unremarkable, with the taste
of shrimp almost completely
lost among the other ingredients. The fried spring rolls
are a better option, with their
harmonious and tasty meat
and vegetable filling.
Of the main dishes, the list
of ph noodle soups should not
be overlooked. I usually choose one of the many beef varieties, although the chicken
is also good. The soups come
with all the traditional accompaniments, including bean
sprouts, chilli and lime.
If soup doesn’t appeal
then try the Bun bo Nam
Bo, a speciality of Southern
Vietnam. These are thin rice
noodles with sautéed beef,
fresh cucumber, sweet-pickled carrots, mixed greens
and a sprinkling of chopped,
roasted peanuts and spring
onions. The dish not only
looks a treat but is also very
healthy and filling.
9 771803 454314
W
hen a busy work
schedule calls for
a healthy and satisfying lunch, it’s uncanny
how Remember Vietnamese
Food always seems to spring
to mind. You may baulk at
the rather shabby interior,
which hardly differs from the
many other Asian restaurants
around town, but don’t let that
deter you. The restaurant is
clean and functional and the
food is very good for the price, with most dishes costing
less than CZK 150.
I like to start with the Phở
cuởn, which sounds like a Vietnamese soup, but is more like bun bo nam bo.
a variation on spring rolls. Thin rice noodles with sautéed beef, mixed salad and peanuts
The wrap is a somewhat
thicker rice pancake, while
don’t
the filling consists of sautéed
miss it.
beef in a sweetish marinade
Chicken
with mixed salad and herbs.
special
The rolls are plump, handhot, and the taste of nicely
seasoned beef predominates.
They are accompanied by a
classic Vietnamese sweet and
sour dipping sauce made of
rice wine vinegar, fish sauce,
water, sugar, garlic, chilli and
other ingredients.
These beefy spring rolls
make a far more satisfying
a dve r t i s i ng
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Photo: Reuters
Klára Donathová
Photos: Stanislav Pecháček
Dachser Czech Republic’s division of air and sea freight services invited customers,
commercial partners, and colleagues from within the rest of the company to visit
its freshly reconstructed depot facilities at Prague’s Václav Havel Airport. Guests
were presented with a guided tour, enabling them to view the operations of the
airport, including those normally off-limits to the public. The event was thematically
dedicated to Vietnam; as such, participants were also able to try to make
Vietnamese spring rolls
Citizens of the Czech
Republic find the idea of
using a single European
ng
currency about as appeali
as that of accepting
boatloads of African and
Middle Eastern refugees
Miroslav Zámečník
T
he Czech Republic
pledged to switch over
to the euro twelve years
ago when it joined the
is still
European Union. Yet thereor monot a single political party
any real
vement willing to invest
the
political capital in promoting
currency.
adoption of the single
Miloš
That leaves only President
devoid
Zeman, constitutio nally
on this
of actual responsibi lity early
as
matter, to speak up for
as possible.
adoption of the euro
alone in
However, he is strikingly
The rest
this particular endeavour.
the
of the nation seems to consider
currency
idea of using the single
about
in its everyday shopping
accepting
as appealing as that of
and Middle
boatloads of African
refugees.
Eastern
not only
The euro was launched
project,
as a politically ambitious
one.
but also as a highly prestigiousmeet
to
Applicants are required
some achispecific criteria (which
accounting
eved by rather creative
and to
and a host of other tricks) rate of
maintain a stable exchange miniwith
the domestic currency
years.
mal fluctuations for two
Continues on page 8
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16
Photo: Reuters
diversions
picture of the week
Boat out of water
Austrian sculptor Erwin Wurm wanted to find a way to spruce up Belgium’s well-travelled waterways. His crooked sailing ship,
officially titled “Misconceivable” (2010), is now permanently housed in the grounds of the Middelheim Museum in Antwerp
invitations
gastronomy
event
opera
exhibition
Legendy motoring
festival
A taste
of the world
Art Safari at Studio
Bubec
Smetana’s Litomyšl
Opera Festival
Roger Hiorns at
Rudolfinum Gallery
750 automobiles, 350 motorcycles, foreign and Czech
motorsport stars, exhibitions
rides, veterans’ events, art
and photography exhibits, and
a rich programme of accompanying events. All this can
be seen and experienced at
the second annual Legendy
motoring festival, held June
12-14 at the Prague-Bohnice
psychiatric hospital park.
Dobřichovice Castle, south
of Prague, is hosting the All
the Tastes of the World food
festival on June 13. Visitors
can taste African, Iranian
and Moroccan ingredients;
Indian cuisine; Argentinean
meats; Swiss Raclette, or
snail specialities. The musical
accompaniment is also of an
international flavour.
Art Safari is an exhibition of
contemporary visual artworks,
featuring a rich accompanying
programme, as well as great
food. The event runs June
13-14, and is held at Studio
Bubec in Prague - Řeporyje.
Also included is a children’s
workshop, film screenings, a
nature walk, concert and a
theatre performance.
The Smetana’s Litomyšl International Opera Festival runs
from June 11 to July 5. Among
the most highly anticipated
events at this year’s 57th annual event is a Czech premiere
vocal performance of “The
Passion of the Christ Symphony” by composer John Debney
from the 2004 film starring
Mel Gibson.
Roger Hiorns (born 1975,
Birmingham) is of the most
promising young artists of his
generation. His new installation “Beings” is a representation of roughly 200 mutants
created from various plastic
components taken from automobiles. The figures levitate
in groups and exude ominous
streams of foam.
Photos: archive
automobiles
`