History

The history of the Czech Republic is rich, complicated, and ancient. By the 6th century, following the Great Migration of the early Middle Ages, the area of what is today the Czech Republic was fully inhabited by Slavs. The first unified "state" in the region, however, was not established until the 7th century under the Frankish merchant Samo. It eventually collapsed after his death. The Greater Moravian Empire emerged in the 9th century, covering most of today's Slovakia, Moravia, and Bohemia. It disintegrated at the beginning of the 10th century, upon which Slovakia was annexed into the Magyar Kingdom where it remained until the end of World War I.

In the interim, a more stable state including Bohemia, Moravia, and Silesia was created as rulers gradually succeeded in extending their control over the whole area. The dukedom, and later kingdom, was ruled by the Premysl house of Bohemia, and managed to preserve its independence for more than six centuries. It reached its commercial, artistic, and political peak in the 14th century under Charles IV, the king of Bohemia, when he became the Holy Roman Emperor.

In 1415, the Czech Christian reformer Jan Hus was burned at the stake as a heretic. His followers led a series of anti-Catholic and anti-German revolts that later became known as the Hussite Wars.

After crushing the Bohemian estates at the Battle of White Mountain in 1620, the Austrian Habsburgs occupied Bohemia, ascended to the vacated Bohemian throne, and ushered in an era of intense Catholicization and Germanization. If not for the powerful wave of nationalism that swept across Europe in the 19th century, Czech culture may have been completely lost. However, the strong Czech and Slovak nationalist revival eventually culminated in the movement for independence.

Taking advantage of the defeat of the Austro-Hungarian Empire during World War I, the Czechs and Slovaks declared their independence in 1918 and were once again, after a thousand year separation, united as one country. Under the leadership of the country's first president, Tomáš Garrigue Masaryk (who had stood at the head of the Czechoslovak liberation movement), and a group of his colleagues, in particular M.R. Stefanik (a nationalistic Slovak), Czechoslovakia quickly developed into successful democracy.

In September 1938, however, Adolf Hitler demanded the surrender of the Sudetenland, a Czechoslovakian border region that was partially inhabited by Sudeten Germans. France, Germany, Great Britain, and Italy met in the infamous Munich Conference to discuss a peace treaty. At that time, they agreed to allow German occupation of the Sudetenland in return for a promise of peace- then President Eduard Beneš, successor to Masaryk, was forced to surrender the region. Six months later, however, in March 1939, Hitler reneged on his commitment to peace and took over the remainder of Czechoslovakia. Bohemia and Moravia were incorporated into the Third Reich and a separate puppet state was set up in Slovakia under the leadership of President Tiso who was later condemned to death for war crimes.

After the defeat of Nazi Germany, Czechoslovakia was reestablished in 1945 with its pre-1938 boundaries with the exception of the easternmost province of Ruthenia (Carpatho-Ukraine) which was ceded to the USSR. Beneš, who was forced to resign by Hitler in October 1938 and who led the Czechoslovak liberation movement from abroad during World War II, resumed the presidency of the restored Czechoslovakia.

As a result of the Yalta Summit, the U.S.S.R. gained great influence over much of Central and Eastern Europe. The Communist Party, taking advantage of the presence of the Soviet Army and the overwhelming Soviet influence, managed to occupy key positions of power in the government. This later enabled them to take over completely in a bloodless coup in February 1948. Beneš was again forced to resign in June 1948 and was replaced as president by the then leader of the Czechoslovak Communist Party, Klement Gottwald. Under Gottwald and his successors, Antonín Zapotocký and Antonín Novotný, Czechoslovakia was converted into a satellite of the Soviet Union.

In January 1968, the more liberal Alexander Dubcek replaced Novotny as the Communist Party's First Secretary. In March 1968, Ludvík Svoboda, who had commanded Czechoslovak troops in the USSR during World War II, became President following Novotny's forced retirement. This leadership change led to an increasingly pronounced liberalization dubbed the "Prague Spring" and to a new political policy known as "Socialism with Human Face." In August 1968, nearly 600,000 troops from Warsaw Pact countries invaded Czechoslovakia to suppress the rapidly developing democratization. Further steps included the appointment of the more orthodox Communist Gustav Husak who replaced Dubcek in April 1969, and whose repressive government ruled the country for the next two decades. A new, unprecedented wave of emigration began.

In 1977, several hundred prominent Czechoslovak intellectuals signed a manifesto titled Charter 77, protesting the suppression of human rights in Czechoslovakia. Despite government persecution, Charter 77 slowly became an unofficial political opposition manifesto during the 1980s. In 1987, Milos Jakes succeeded Husak- Jakes was a close associate of the Secretary General.

Small demonstrations were held on the 21st anniversary of the 1968 Soviet-led invasion. Beginning in Prague on November 17, 1989, hundreds of demonstrators, emboldened by the sweeping political changes taking place in East Germany, Poland, Hungary, and the Soviet Union itself, took to the streets to demand political and economic liberation. Late that November, Secretary General of the Communist Party Jakes resigned along with other members of the Politburo. Finally, on November 28, 1989, the Communist Party allowed noncommunist ministers into the cabinet, thereby giving up its 41-year monopoly on political power. On December 20 of the same year, the National Assembly chose Alexander Dubcek as its chairman, and the following day elected playwright and dissident leader Václav Havel to the post of President. In June 1990, the first free elections in 42 years resulted in a new Federal Assembly. The Czech Republic remains today the only former Communist country in Eastern Europe not to have elected former Communist leaders back into power.

In the summer of 1992, based on the outcome of the general elections, a law was passed dissolving the 74-year union between the Czechs and Slovaks. On January 1, 1993, the country of Czechoslovakia ceased to exist, and the Czech and Slovak Republics were born.

Economy

The Czech economy has improved steadily since the fall of Communism in 1989. It leads all former Soviet satellite states in economic growth. The largest component of the Czech Republic's economy is manufacturing followed by services; these sectors account for approximately 40 and 35 percent of GDP respectively. The construction and energy sectors each generate roughly 10 percent of GDP while the smaller agricultural sector accounts for approximately 5 percent. Tourism is one of the most rapidly developing sectors of the Czech economy.

The Czech Republic has become an increasingly popular tourist destinations in Europe. The most frequently visited place is Prague, followed by the West Bohemian spa triangle, which includes Karlovy Vary, Marianske Lázně, and Františkovy Lázně. The many historical castles and chateaux across the country are also popular with tourists. In 1998, over 100 million tourists visited the Czech Republic.

According to the Wall Street Journal's Index of Economic Freedom, the Czech Republic has one of Europe's most open markets. It ranks well ahead of all other former Soviet satellite states. Since the breakup of the Warsaw Pact in 1989, the Czech Republic has pursued extensive economic liberalization, trading mainly with the European Union (EU) and countries of the former Soviet Union. Today, more than one third of its trade is with Germany. The Czech Republic become member of EU on May 1, 2004. It is also a member of the OECD and World Trade Organization.

The public sector consumes about 19 percent of GDP. In 1990, the government initiated a massive privatization program, and has pursued an anti-inflationary monetary policy since 1992. These efforts have allowed the private sector to grow to a point where it now generates between 70 percent and 80 percent of GDP.

All sectors of the economy are open to foreign investment. Currently, in order, Germany, the Netherlands and the United States are the largest investors in the Czech Republic. According to the US Department of Commerce, "An open investment climate has been a key element of the Czech Republic's economic transition. The country's investment grade ratings from the international credit rating agencies and its membership in the prestigious OECD testify to its positive economic fundamentals."

Competition in the Czech Republic's banking system is increasing because there are few barriers to opening either a foreign or domestic bank. Banks also are open to foreign participation; a foreign bank may establish a wholly owned bank, buy into an existing bank, or open a branch.

The market sets most wages and prices; however, the prices of many utilities, rail and bus transport, and rent paid on government-owned housing are still controlled. The Czech Republic imposes few regulations on businesses, and most companies do not need a license to begin operation. In addition, the government is planning to reduce even further its regulations on business activity in order to encourage economic growth.

The Czech Republic traditionally ranks highly among developed industrial nations, with an intensive agriculture industry and a highly qualified labor force. Some of the country's most important industries involve machinery, food processing (including its world-famous beer, special meat products, and quality dairy products), chemicals, steel, electrical engineering and electronics. The textile, footwear, glass and ceramics industries also have a long tradition. Within the context of Central Europe, agriculture contributes relatively little to the GDP, but commodities like pork, beef, poultry, wheat, sugar beet, barley, potatoes, rye, corn, vegetables, hops, and grapes are vital to both domestic and foreign markets.

Privatisation

There was essentially no private sector economy in the Czech Republic during Communist rule, which ended in 1989. The first important step in its development was the restitution of previously nationalized property. In 1990, small-scale businesses, stores and service outlets began to be sold by public auction under the Act on Small Privatization. In addition to these auctions and other traditional methods of privatization such as tenders and public offerings, a unique method of coupon privatization was applied to 1,664 joint-stock companies and to property worth CZK 350 billion- this coupon privatization created about 6 million new individual or corporate shareholders. As a result of these efforts, more than three quarters of the country's GDP is now generated by the private sector.