Boston, MA -- (ReleaseWire) -- 02/13/2013 -- As the Czech Republic's government remained strongly committed to its fiscal austerity drive as 2012 winds to a close, the impact of cuts could be easily seen in the country's defence spending plans. A centre-right government that has become increasingly politically precarious has turned to phased and joint procurement during the year, in a bid to circumvent tight budgetary pressure. BMI expects to see expenditure decline by 6.8% (in dollar terms) to CZK57.65bn (US$2.91bn) in 2013, following a 10.63% contraction in 2012.
Our long-held view for the coalition government to continue facing challenges over the course of its tenure continues to play out strongly. The re-shuffling of the three-party coalition back in April 2012, as a result of the disintegration of the Public Affairs (VV) party meant that the coalition lost its large majority in parliament. Although the government has been able to survive a number of no confidence votes in the past couple of years, disruptions have primarily come from other coalition parties and largely not from within parties themselves. Despite public support for the coalition parties being extremely weak, following on from years of fiscal austerity and a slew of corruption scandals, there is a strong possibility that the government will not be able to survive a possible vote of no confidence.
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The military said in early 2012 that it was planning to jointly procure defence assets - particularly radar systems - with Slovakia in response to budget constraints. Czech General Vlastimil Picek concluded talks with a Slovak counterpart in March 2012 over the joint acquisition of mobile air defence radar (MADR), airport radar systems and machine guns.
The government also reached an agreement with the Iraqi authorities over the sale of 28 aircraft under a US$1bn deal in October 2012. Czech manufacturer Aero Vodochody is behind the deal, which includes 24 new subsonic Aero L-159 light combat aircraft and four existing units that the military said were no longer in use. Aero Vodochody is due to deliver the first unit about six months after the agreement is signed (at the time of the announcement various technical details had yet to be finalised), while all units are expected to be delivered within four years.
Meanwhile, the government started negotiations with Sweden in mid-2012 over the potential extension of lease agreements for SAAB 39 Gripen aircraft. The Defence Ministry is looking to extend the 10-year lease - which cost CZK19.6bn (US$748.43mn) when signed in June 2004 - for 14 of the aircraft. However, the government has set a deadline for negotiations at November 2012 and claims it may consider issuing a public tender for a supersonic fleet if talks with Sweden are not found to be favourable.
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