US DEPARMENT OF STATE BACKGROUND NOTE: CZECH REPUBLIC JULY 1994 Official Name: Czech Republic PROFILE Geography Area: 78,864 sq. kilometers; about the size of Virginia. Cities: Capital--Prague (pop. 1.2 million). Other cities--Brno (385,000), Ostrava (327,000), Plzen (175,000). Terrain: Low mountains to the north and south, hills in the west. Climate: Temperate. People Nationality: Noun and adjective--Czech(s). Population (1993 est.): 10.5 million. Annual growth rate: 0.1%. Ethnic groups: Czech (95%), Germans, Gypsies, Poles, Silesians, Slovaks. Religions: Roman Catholic, Protestant. Language: Czech. Education: Literacy--99%. Health: Life expectancy--males 68 years, females 75 years. Work force: 5.2 million; industry, construction and commerce--47%, government and other services--41%, agriculture--11%. Government Type: Parliamentary republic. Independence: The Czech Republic was established January 1, 1993 (former Czechoslovak state established 1918). Constitution: Signed December 16, 1992. Branches: Executive--president (chief of state), prime minister (head of government), cabinet. Legislative--Chamber of Deputies (formerly the Czech National Council), Senate (to be elected in 1994). Judicial-- Supreme Court, Constitutional Court. Political parties: Civic Democratic Party-Christian Democratic Party (ODS-KDS), 76 seats; Left Bloc (Communist Party of Bohemia and Moravia [KSCM]-Democratic Left [DL]), 35 seats; Czechoslovak Social Democratic Party (CSSD), 16 seats; Liberal Social Union (LSU), 16 seats; Christian Democratic Union-Czech Peoples Party (KDU-CSL), 15 seats; Association for the Republic-Republican Party of the Czech Republic (SPR-RSC), 14 seats; Civic Democratic Alliance (ODA), 14 seats; Movement for Autonomous Democracy in Moravia and Silesia (HSDMS), 14 seats. Suffrage: Universal at 18. Administrative subdivisions: Two regions--Bohemia and Moravia; seven administrative districts and Prague. Flag: Blue triangle on staff side; upper white band, lower red band. Economy GDP (1993 est.): $30 billion. Per capita income (1993 est.): $3,000. Natural resources: Coal, coke, timber, lignite, uranium, magnesite. Agriculture: Products--wheat, rye, oats, corn, barley, hops, potatoes, sugar beets, hogs, cattle, horses. Industry: Types--iron, steel, machinery and equipment, cement, sheet glass, motor vehicles, armaments, chemicals, ceramics, wood, paper products, and footwear. Trade (1993): Exports--$9 billion: machinery, iron, steel, chemicals, raw materials, consumer goods. Trading partners--Austria, Belgium, Commonwealth of Independent States, France, Germany, Hungary, Poland, Switzerland, United States. Exchange rate (July 1994): 30 Czech crowns=$1. PEOPLE The majority of the 10.5 million inhabitants of the Czech Republic are ethnically and linguistically Czech (95%). Other ethnic groups include: Germans, Gypsies, Poles, and Silesians. After the division, some Slovaks remained in the Czech Republic and comprise roughly 3% of the current population. The border between the Czech Republic and Slovakia is open for former citizens of Czechoslovakia. Laws establishing religious freedom were passed shortly after the revolution of 1989 lifting oppressive regulations enacted by the former communist regime. Major denominations and their estimated percentage populations are: Roman Catholic (39%), Protestant (4%). A large percentage of the Czech population claim to be atheists (49%), and 16% describe themselves as uncertain. About 10,000 Jews continue to live there of a pre-war population of more than 360,000. HISTORY The Czech Republic was the western part of the Czech and Slovak Federal Republic. Formed into a common state after World War I (October 18, 1918), the Czechs, Moravians, and Slovaks remained united for more than 75 years. On January 1, 1993, the two republics split to form two separate states. The Czechs lost their national independence to the Austro-Hungarian Empire in 1620 at the Battle of White Mountain and, for the next 300 years, were ruled by the Austrian Monarchy. With the collapse of the monarchy at the end of World War I, the independent country of Czechoslovakia was formed, encouraged by, among others, U.S. President Woodrow Wilson. Despite cultural differences, the Slovaks shared with the Czechs similar aspirations for independence from the Hapsburg state and voluntarily united with the Czechs. The Slovaks were not at the same level of economic and technological development as the Czechs, but the freedom and opportunity found in Czechoslovakia enabled them to make strides toward overcoming these inequalities. However, the gap never was fully bridged, and the discrepancy played a continuing role throughout the 75 years of the union. Although Czechoslovakia was the only East European country to remain a parliamentary democracy from 1918 to 1938, it was plagued with minority problems, the most important concerning the country's large German population. Constituting more than 22% of the interwar state's population and largely concentrated in the Bohemian and Moravian border regions (the Sudetenland), members of this minority supported in large part by Nazi Germany undermined the new Czechoslovak state. Internal and external pressures culminated in September 1938, when, at Munich, France, and the United Kingdom yielded to Nazi pressures and agreed to force Czechoslovakia to cede the Sudetenland to Germany. Fulfilling Hitler's aggressive designs on all of Czechoslovakia, Germany invaded what remained of Bohemia and Moravia in March 1939, establishing a German "protectorate." By this time, Slovakia had already declared independence and had become a puppet state of the Germans. At the close of World War II, Soviet troops overran all of Slovakia, Moravia, and much of Bohemia, including Prague. In May 1945, U.S. forces liberated the city of Plzen and most of western Bohemia. A civilian uprising against the German garrison took place in Prague in May 1945. Following Germany's surrender, some 2.9 million ethnic Germans were expelled from Czechoslovakia with Allied approval. Reunited after the war, the Czechs and Slovaks set federal and national elections for the spring of 1946. The democratic elements, led by President Eduard Benes, hoped the Soviet Union would allow Czechoslovakia the freedom to choose its own form of government and aspired to a Czechoslovakia that would act as a bridge between East and West. The Czechoslovak communist party, which won 38% of the vote, held most of the key positions in the government and gradually managed to neutralize or silence the anti-communist forces. Although the communist-led government initially intended to participate in the Marshall Plan, it was forced by Moscow to back out. Under the cover of superficial legality, the communist party seized power in February 1948. After extensive purges modeled on the Stalinist pattern in other East European states, the communist party tried 14 of its former leaders in November 1952 and sentenced 11 to death. For more than a decade thereafter, the Czechoslovak communist political structure was characterized by the orthodoxy of the leadership of party chief Antonin Novotny. The 1968 Soviet Invasion The communist leadership allowed token reforms in the early 1960s, but discontent arose within the ranks of the communist party central committee, stemming from dissatisfaction with the slow pace of the economic reforms, resistance to cultural liberalization, and the desire of the Slovaks within the leadership for greater autonomy for their republic. This discontent expressed itself with the removal of Novotny from party leadership in January 1968 and from the presidency in March. He was replaced as party leader by a Slovak, Alexander Dubcek. After January 1968, the Dubcek leadership took practical steps toward political, social, and economic reforms. In addition, it called for politico-military changes in the Soviet-dominated Warsaw Pact and Council for Mutual Economic Assistance. The leadership affirmed its loyalty to socialism and the Warsaw Pact but also expressed the desire to improve relations with all countries of the world regardless of their social systems. A program adopted in April 1968 set guidelines for a modern, humanistic socialist democracy that would guarantee, among other things, freedom of religion, press, assembly, speech, and travel; a program that, in Dubcek's words, would give socialism "a human face." After 20 years of little public participation, the population gradually started to take interest in the government, and Dubcek became a truly popular national figure. The internal reforms and foreign policy statements of the Dubcek leadership created great concern among some other Warsaw Pact governments. On the night of August 20, 1968, Soviet, Hungarian, Bulgarian, East German, and Polish troops invaded and occupied Czechoslovakia. The Czechoslovak Government immediately declared that the troops had not been invited into the country and that their invasion was a violation of socialist principles, international law, and the UN Charter. The principal Czechoslovak reformers were forcibly and secretly taken to the Soviet Union. Under obvious Soviet duress, they were compelled to sign a treaty that provided for the "temporary stationing" of an unspecified number of Soviet troops in Czechoslovakia. Dubcek was removed as party First Secretary on April 17, 1969, and replaced by another Slovak, Gustav Husak. Later, Dubcek and many of his allies within the party were stripped of their party positions in a purge that lasted until 1971 and reduced party membership by almost one- third. The 1970s and 1980s became known as the period of "normalization," in which the apologists for the 1968 Soviet invasion prevented, as best they could, any opposition to their conservative regime. Political, social, and economic life stagnated. The population, cowed by the "normalization," was quiet. At the time of the communist takeover, Czechoslovakia had a balanced economy and one of the higher levels of industrialization on the continent. In 1948, however, the government began to stress heavy industry over agricultural and consumer goods and services. Many basic industries and foreign trade, as well as domestic wholesale trade, had been nationalized before the Communists took power. Nationalization of most of the retail trade was completed in 1950-51. Heavy industry received major economic support during the 1950s, but waste and inefficient use of industrial resources resulted from central planning. Although the labor force was traditionally skilled and efficient, inadequate incentives for labor and management contributed to high labor turnover, low productivity, and poor product quality. Economic failures reached a critical stage in the 1960s, after which various reform measures were sought, with no satisfactory results. Hope for wide-ranging economic reform came with Alexander Dubcek's rise in January 1968. Despite renewed efforts, however, Czechoslovakia could not come to grips with inflationary forces, much less begin the immense task of correcting the economy's basic problems. The economy saw growth during the 1970s but then stagnated between 1978- 82. Attempts at revitalizing it in the 1980s with management and worker incentive programs were largely unsuccessful. The economy grew after 1982, achieving an annual average output growth of more than 3% between 1983-85. Imports from the West were curtailed, exports boosted, and hard currency debt reduced substantially. New investment was made in the electronic, chemical, and pharmaceutical sectors, which were industry leaders in Eastern Europe in the mid 1980s. The Velvet Revolution The roots of the 1989 civic Forum movement that came to power during the "Velvet Revolution" lie in human rights activism. On January 1, 1977, more than 250 human rights activists signed a manifesto called the Charter 77, which criticized the government for failing to implement human rights provisions of documents it had signed, including the state's own constitution; international covenants on political, civil, economic, social, and cultural rights; and the Final Act of the Conference for Security and Cooperation in Europe. Although not organized in any real sense, the signatories of Charter 77 constituted a citizens' initiative aimed at inducing the Czechoslovak Government to observe formal obligations to respect the human rights of their citizens. In the days after November 17, 1989, Charter 77 and other groups united to become the Civic Forum, an umbrella group championing bureaucratic reform and civil liberties. Its leader was the dissident playwright Vaclav Havel. Intentionally eschewing the label "party," a word given a negative connotation during the previous regime, Civic Forum quickly gained the support of millions of Czechs, as did its Slovak counterpart, Public Against Violence. Faced with an overwhelming popular repudiation, the Communist Party all but collapsed. Its leaders, Husak and party chief Milos Jakes, resigned in December 1989, and Havel was elected President of Czechoslovakia on December 29. The astonishing quickness of these events was in part due to the unpopularity of the communist regime and changes in the policies of its Soviet guarantor as well as to the rapid, effective organization of these public initiatives into a viable opposition. A coalition government, in which the communist party had a minority of ministerial positions, was formed in December 1989. The first free elections in Czechoslovakia since 1948 took place in June 1990 without incident and with more than 95% of the population voting. As anticipated, Civic Forum and Public Against Violence won landslide victories in their respective republics and gained a comfortable majority in the federal parliament. The parliament undertook substantial steps toward securing the democratic evolution of Czechoslovakia. It successfully moved toward fair local elections in November 1990, ensuring fundamental change on the county and town level. Civic Forum found, however, that although it had successfully completed its primary objective--the overthrow of the communist regime--it was ineffectual as a governing party. The demise of Civic Forum was viewed by most as necessary and inevitable. By the end of 1990, unofficial parliamentary "clubs" had evolved with distinct political agendas. These solidified into the parties that make up the Czech political landscape. Most influential is the Civic Democratic Party, headed by Prime Minister and former Federal Minister of Finance Vaclav Klaus. Other notable parties that came into being after the split were the Civic Movement and Civic Democratic Alliance. By 1992, Slovak calls for greater autonomy effectively blocked the daily functioning of the federal government. In the election of June 1992, Klaus's Civic Democratic Party won handily in the Czech lands on a platform of economic reform. Vladimir Meciar's Movement for a Democratic Slovakia emerged as the leading party in Slovakia, basing its appeal on fairness to Slovak demands for autonomy. Federalists, like Havel, were unable to contain the trend toward the split. In July 1992, President Havel resigned. In the latter half of 1992, Klaus and Meciar hammered out an agreement that the two republics would go their separate ways by the end of the year. Members of the federal parliament, divided along national lines, barely cooperated enough to pass the law officially separating the two nations. The law was passed on December 27, 1992. On January 1, 1993, the Czech Republic and the Republic of Slovakia were simultaneously and peacefully founded. Relationships between the two states, despite occasional disputes about the division of federal property and governing of the border have been as peaceful as Prime Ministers Klaus and Meciar promised. Both states attained immediate recognition from the U.S. and their European neighbors. POLITICAL CONDITIONS AND GOVERNMENT The Czech political scene supports a broad spectrum of parties ranging from the semi-reformed communist party on the far left to the nationalistic Republican Party on the extreme right. Currently, the ruling coalition comprises the Civic Democratic Party (ODS), the Civic Democratic Alliance (ODA), the Christian Democratic Party (KDU-CSL), and the splinter Christian Democratic Party (KDS). It is generally considered right of center. The ruling coalition includes several prominent economists and derives support mainly from the free market reforms they advocate. As Prime Minister, Klaus represents the coalition and wields considerable power. These powers include the right to set the agenda for most foreign and domestic policy, mobilize the parliamentary majority, override a presidential veto, and choose governmental ministers. Vaclav Havel, now President of the Czech Republic, is not affiliated with any party but remains one of the country's most popular politicians. As formal head of state, he is granted specific powers such as the right to nominate Constitutional Court judges, dissolve parliament under certain conditions, and enact a veto on legislation. With the split of the former Czechoslovakia, the powers and responsibilities of the now defunct federal parliament were transferred to the Czech National Council, which renamed itself the Chamber of Deputies. It has become the highest legislative body. Constitutionally, it is bicameral, with the Chamber of Deputies and the Senate. The Senate has not yet been elected; elections are slated for later in 1994. Chamber delegates are elected from seven districts and the capital, Prague, for four-year terms, on the basis of proportional representation. The country's highest court of appeals is the Supreme Court, elected by and responsible to the Chamber of Deputies. The Constitutional Court, which rules on constitutional issues, is appointed by the president, and its members serve 10-year terms. National Security Issues A major overhaul of the Czechoslovak defense forces began in 1990 and continues in the Czech Republic. The military has assumed a more national-defense orientation. The armed forces that numbered up to 200,000 in 1989 will be cut down to 65,000 by 1995. Other reforms include: -- Cutting the Czechoslovak Army from 48,000 to 23,000 members. It is now organized into corps with subordinate brigades. -- Cutting the Czechoslovak Air Force from 55,000 to 27,000. It is now organized into air defense and tactical air corps, each with two air divisions. -- Dropping the compulsory military training requirement for those more than 18 from two years to one. Principal Government Officials President--Vaclav Havel (Independent) Prime Minister--Vaclav Klaus (ODS) Foreign Minister--Josef Zieleniec (ODS) Ambassador to the U.S.--Michael Zantovsky The Czech Republic maintains an embassy at 3900 Spring of Freedom Street, NW, Washington, D.C. 20008, (tel. 202-363-6315). ECONOMY Of the emerging democracies in Central and Eastern Europe the Czech Republic has one of the most developed industrialized economies. Its strong industrial tradition dates to the 19th century, when Bohemia and Moravia were the economic heartland of the Austro-Hungarian Empire. Today, this heritage is both an asset and a liability. The Czech Republic has a well educated population and a well developed infrastructure, but its industrial plants and much of its industrial equipment tend to be obsolete. According to the Stalinist development policy of planned interdependence, all the economies of the socialist countries were linked tightly with that of the Soviet Union. With the disintegration of the communist economic alliance in 1991, Czech manufacturers lost their traditional markets among former communist countries to the East, some of whom still owe the former Czechoslovakia sizable debts. The Czech Republic lacks sufficient energy resources as well as many other raw materials. Its major source of energy is highly polluting low-grade brown coal, which is not considered a viable long-term option. Nuclear energy is currently considered the country's most plausible alternative. The Czechs are almost entirely dependent on a Russian pipeline for petroleum and natural gas. For this reason, they have recently signed an agreement to construct an oil pipeline from Germany by 1994. The principal industries are heavy and general machine-building, iron and steel production, metalworking, chemicals, electronics, transportation equipment, textiles, glass, brewing, china, ceramics and pharmaceuticals. Its main agricultural products are sugar beets, fodder roots, potatoes, wheat, and hops. The "Velvet Revolution" in 1989 offered a chance for profound and sustained economic reform. Signs of economic resurgence have begun to appear in the wake of the shock therapy that the International Monetary Fund (IMF) labeled the "big bang" of January 1991. Since then, astute economic management has led to the liberalization of 95% of all price controls, annual inflation in the 10%-15% range, modest budgetary deficits of 2%-4% of GDP, low unemployment, a positive balance-of- payments position, a stable exchange rate, foreign reserves at a post- World War II high (about $5 billion), a shift of exports from former communist economic bloc markets to Western Europe, and a manageable foreign debt. Particularly impressive have been the Republic's strict fiscal policies. Following a series of currency devaluations ending in January 1991, the crown has remained stable in relation to the U.S. dollar. The black market exchange rate, which in the past deprived the government of valuable western currency, has effectively been eliminated. The Czech crown, now partially convertible, should become fully convertible in 1995 or 1996. In addition, the government has revamped the legal and administrative structure governing investment in order to stimulate the economy and attract foreign partners. Shifting emphasis from the East to the West has necessitated restructuring existing facilities in banking and telecommunications as well as adjusting commercial laws and practices to fit Western standards. The republic has made progress toward creating a stable investment climate. This success enabled the Czech Republic to become the first post- communist country to receive an investment grade credit rating by international credit institutions. For this reason, the country attracted $3 billion in foreign investment during the period of 1991 to 1993, with the U.S. holding 30% of the foreign investment, in second place just after Germany. The Czech Government welcomes U.S. investment, in particular, as a counter-balance to the strong economic influence of Western Europe, specifically that of their powerful neighbor Germany. Since the Velvet Revolution, the number of U.S. companies represented in Prague (where nearly all the foreign investors are located) has increased from a handful to more than 500. The government has an ambitious plan to privatize state industries in all sectors of the economy. It hopes to create a private sector rapidly using the following means: restitution of property confiscated under the former communist regime, sale of large and small state-owned enterprises through a voucher system, direct sales and rights to ownership for foreign investors, and encouraging entrepreneurship. The republic boasts a flourishing consumer production sector and is making marked progress toward privatizing state-owned heavy industries through the voucher privatization system. Under the system, every citizen was given the opportunity to buy, for a moderate price, a book of vouchers that represents potential shares in any state-owned company. The voucher holders could, then, invest their vouchers, infusing the chosen company with valuable capital. State ownership of businesses, estimated to be about 97% under communism, will be reduced to about 30% by the end of 1994. When the voucher privatization process is complete, Czechs will own shares of each of the Czech companies, making them one of the highest per capita share owners in the world. Privatization through restitution of real estate to the former owners was largely completed in 1992. In the words of Prime Minister Klaus, the republic has "crossed the Rubicon" in terms of privatization. The republic's economic transformation is far from complete--the government still faces serious challenges in transforming the housing sector, privatizing the health care system, solving serious environmental problems, and helping newly privatized state-owned companies adjust to the rigors of free-market competition. Full membership in the European Union (EU), which the government hopes to achieve by the year 2000, is probably the country's highest foreign policy goal. It became an associate member of the EU in 1993, but it may take a decade or more for the economy to reach Western European standards. As of 1993, wage levels, averaging $200 a month, were 10%- 20% of those in the neighboring Germany and Austria. Productivity also is substantially lower due to chronic underinvestment. The division of Czechoslovakia has not had an appreciable effect on the Czech economy. An agreement was concluded to divide all federal property of the former Czechoslovak state according to a 2:1 ratio in favor of the Czech Republic. Firm monetary and fiscal policies are likely to be maintained, meeting the objective of a balanced budget. Real GDP is likely to remain stable, with unemployment increasing to about 5% and inflation to the 20% range. FOREIGN RELATIONS The foreign policy of Czechoslovakia had, until 1989, followed that of the Soviet Union. Since independence, the Czechs have made integration into Western institutions their chief foreign policy objective. Fundamental to this objective is Czech membership in the European Union. The government has met most EU demands. Although there have been disagreements over some economic issues, such as agricultural tariffs, the EU has signed various association agreements with the Czech Government designed to facilitate membership. The Czech Republic is a member of the United Nations and participates in its specialized agencies. It is a member of the General Agreement on Trade and Tariffs (GATT). It maintains diplomatic relations with more than 85 countries, of which 63 have permanent representation in Prague. U.S.-CZECH RELATIONS Millions of Americans have their roots in Bohemia and Moravia, and a large community in the United States has strong cultural and familial ties with the Czech Republic. President Woodrow Wilson and the United States played a major role in the establishment of the original Czechoslovak state on October 28, 1918. President Wilson's 14 Points, including the right of ethnic groups to form their own states, were the basis for the union of the Czechs and Slovaks. Tomas Masaryk, the father of the state and its first President, visited the United States during World War I and worked with U.S. officials in developing the basis of the new country. He used the U.S. Constitution as a model for the first Czechoslovak Constitution. After World War II, and the return of the Czechoslovak government in exile, normal relations were continued until 1948, when the communists seized power. Relations cooled rapidly. The Soviet invasion of Czechoslovakia in August 1968 further complicated U.S.-Czechoslovak relations. The United States referred the matter to the UN Security Council as a violation of the UN Charter, but no action was taken against the Soviets. With the "Velvet Revolution" of 1989, bilateral relations have improved immensely. Dissidents once sustained by U.S. encouragement and human rights policies reached high levels in the government. President Havel, in his first official visit as head of the Czechoslovakia, addressed the U.S. Congress and was interrupted 21 times by standing ovations. In 1990, on the first anniversary of the revolution, President Bush, in front of an enthusiastic crowd on Prague's Wenceslas Square, pledged U.S. support in building a democratic Czechoslovakia. Toward this end, the U.S. Government has actively encouraged the political and economic transformation. U.S. funding has been in the range of $30-$35 million annually, largely regional programs administered by the U.S. Agency for International Development. Although the U.S. Government was originally opposed to the idea of Czechoslovakia forming two separate states, concerned that the split might aggravate existing regional political tensions, it recognized both the Czech Republic and Slovakia on January 1, 1993. Since then, U.S.- Czech relations have remained strong economically, politically, and culturally. TRAVEL NOTES Customs: A passport is needed but a visa is not required for stays of up to 30 days. For further information concerning entry requirements for the Czech Republic, travelers can contact the Embassy of the Czech Republic at 3900 Spring of Freedom Street, NW, Washington, DC 20008, telephone (202) 363-6315. Health: Medical facilities are available. Some facilities, particularly in remote areas, may be limited. Doctors and hospitals often expect cash payment for health services. U.S. medical insurance is not always valid outside the United States. Travellers have found that in some cases, supplemental medical insurance with specific overseas coverage has proved to be useful. Further information on health matters can be obtained from the Centers for Disease Control's international travellers hotline at (404) 332-4559. (###) Published by the United States Department of State -- Bureau of Public Affairs -- Office of Public Communication -- Washington, DC July 1994 - - Managing Editor: Peter Knecht -- Editor: Peter Freeman Department of State Publication 10190 Background Notes Series -- This material is in the public domain and may be reprinted without permission; citation of this source is appreciated. For sale by the Superintendent of Documents, U.S. Government Printing Office,Washington, DC 20402. (###)