Boston, MA -- (SBWIRE) -- 12/10/2013 -- The Czech Republic is to continue to benefit from its membership in both NATO and the EU, both in terms in the capability of its armed forces and the breadth and capacity of its defence industry. Budgetary constraints are to keep troop levels and budgetary allocation stagnant for the foreseeable future. This in turn will result in little growth in the domestic arms market, although international sales of training aircraft continue to perform well. As part of the EU and NATO, and with a small international presence, the Czech Republic has few threats to its security, although the rise of the far-right is an issue we continue to monitor.

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Our long-held view for the coalition government to continue facing challenges over the course of its tenure continues to play out strongly. The Czech parliament dissolved itself on August 20 2013 after a dissolution proposal, which was put forth by the centre-left Social Democratic Party (CSSD), the far-left Communist Party (KSCM) and the centre-right TOP09, was supported by 140 votes in the 200-seat Parliament. The collapse of support for the centre-right party of former Prime Minister Petr Necas came not only on the back of the painful austerity measures implemented by his administration that saw value added taxes increase twice and government expenditure reduced during his term. Necas' unpopularity was also due to the bribery and illegal spying scandal involving Necas' chief of staff that triggered his resignation and his party's ouster.

In light of the likely leftist nature of the winners of the upcoming Czech election, we do not expect any significant funding increases or procurement drives for the Czech military. Indeed, the Czech armed forces continue to sell off assets, pre-dating the reforms which significantly cut troop numbers, in an effort to raise funds.

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. Similarly, and indicative of a trend we expect to continue, Czech and Swedish defence firms have agreed to work together on military technology - a good move for the Czechs due to the level of Swedish hardware the armed forces have in use.

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