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Czech out time

The cantankerous prime minister of the Czech Republic, Milos Zeman, will soon leave office, but his legacy of reforms has put the country firmly on the path to EU membership.

The cantankerous prime minister of the Czech Republic, Milos Zeman, will soon leave office, but his legacy of reforms has put the country firmly on the path to EU membership.

By Jonathan Kandell
April 2002
Institutional Investor Magazine

European ambassador in Prague was asked recently for his impressions of Czech Prime Minister Milos Zeman. He cited a deep understanding of economics, political charisma, a sense of humor, pragmatism and great stamina. On the debit side, he took Zeman to task for smoking and drinking too much, bouts of boorish behavior, unpredictability and a lack of diplomacy, especially toward the Czech Republic's neighbors.

"Oh, and also, he's arrogant," said the ambassador. "He's convinced he's the best politician in Eastern Europe and that the country would still be mired in recession if he weren,t premier. And he's probably right."

Since becoming prime minister in July 1998, Zeman has kept his minority government of left-leaning Social Democrats in power by taking advantage of bitter divisions among the center-right parties and usurping their territory. Embracing privatization and foreign investment with more fervor than many conservative opponents, Zeman has steered the once-ailing economy back to growth and led the Czech Republic to the verge of membership in the European Union.

"Elementary, my dear Watson," says the prime minister with typical bluster when asked to explain the turnaround during an interview with Institutional Investor. "There are no left-wing or right-wing economic policies , only good or bad ones."

But will the new government that takes office after this June's elections for the Chamber of Deputies, the lower house of Parliament, be able to build on Zeman,s legacy of "good" economic policies? Zeman himself is stepping down, and in the last months of his term some of his economic reforms have started to lose steam. After selling off an armful of public sector firms, his government has displayed ineptitude in its attempt to privatize the few big state companies remaining, such as electricity producer CEZ and the telephone monopoly Cesk´y Telecom. The revenues from these privatizations are sorely needed to close a budget deficit that could otherwise soar to 9 percent this year.

Zeman's political legacy is also somewhat shaky. He predicts his Social Democrats will remain in power under his protégé, Vladimir Spidla, currently deputy prime minister and minister of Labor and Social Affairs. But opinion surveys indicate that no party is likely to garner a majority vote, and Spidla has yet to demonstrate Zeman's leadership skills. Nor do the center-right Civic Democrats, who have been informally backing Zeman's government in a so-called "tolerance pact," seem inclined to be as accommodating the next time around.

"The pact with the Social Democrats has been a one-way street , in their favor," complains Senator Mirek Topolánek, a rising Civic Democrat. "We have had no influence at all on government policies." Conceivably, the Civic Democrats could patch up their differences with the other center-right party bloc, the Coalition, and form a conservative government that excludes the Social Democrats.

But by placing the Czech Republic firmly on course for membership in the European Union in 2004, Zeman has virtually ensured that the next government , whether left or right wing , will carry on with the bulk of his reforms to encourage greater privatization, foreign investment, fiscal transparency, corporate governance and other policies designed to meet EU admission standards for a competitive market economy. "EU accession is such an overriding political objective that there is very little room for economic maneuvering," notes Roger Nord, the International Monetary Fund's regional resident representative in Central Europe.

Membership in the EU was anything but inevitable for the Czech Republic when Zeman became prime minister. Indeed, the country was considered a much less likely candidate than its neighbors, Hungary and Poland. Zeman had inherited an economic mess from his predecessor, Václav Klaus, the leader of the Civic Democrats.

After the downfall of the Communist regime in 1989, Klaus launched a much ballyhooed privatization program that initially made him the darling of global investors but soon afterward wrecked hundreds of companies, buried banks under an avalanche of bad loans and added a new term to the language of economics , "tunneling" , for the fraudulent funneling of capital into nonviable businesses. (More successfully, the government also returned property seized by the Communists. See box, page 32.) During the decade of the 1990s, the Czech economy actually contracted by 0.2 percent. And on a per capita basis, foreign direct investment in the Czech Republic lagged behind that in Hungary or Poland.

Zeman reversed those two trends. Today the Czech Republic exceeds all Eastern European countries in cumulative foreign direct investment per capita ($2,233). The private sector's share of the economy has risen from less than two thirds just three years ago to 80 percent. Most surprisingly, GDP grew 2.9 percent in 2000 and 3.4 percent last year in the midst of a global slowdown, chiefly because of the surge in foreign investment.

Opposition politicians and other interested observers agree that the government's policies have been both unexpected and effective. "We didn,t think the Social Democrats would push privatization so strongly , even if they did it mainly to help cover the budget deficit," says Dan Stastny, an economist at the Liberal Institute, a foundation with a Milton Friedmanesque ideology and the financial support of various Czech corporations. According to Weston Stacey, executive director of the Prague-based American Chamber of Commerce in the Czech Republic, "the overall business climate has improved dramatically in the past few years, especially given the expectations when Zeman took over that there would be a slowdown in privatization and in the move toward EU membership." Even Senator Topolánek, no fan of the government, concedes, "the Social Democrats have done better than we could have hoped with the economy, especially on privatizations."

Zeman conducts himself as if he headed a majority rather than a minority government. His Social Democrats hold all the cabinet seats but only 74 of the 200 seats in the Chamber of Deputies and a paltry 14 out of 100 Senate seats. Yet Zeman doesn,t bother to conceal his disdain for his conservative allies, the Civic Democrats, whose support has kept him in office under the informal tolerance pact. This is typical of Zeman,s unorthodox political style. His announcement last July that he would not seek a second term as prime minister , he said that he would instead retire to his mountain cabin and "hug trees" , seems not to have left his government any weaker for its lame-duck status.

Zeman's edgy approach to politics doesn,t stop at the border. Despite his determination to gain his country entrée to the EU, the prime minister has had no qualms about picking fights with Austria and Germany, two neighboring EU members whose backing the Czech Republic will need to join the euro club. (EU membership requires unanimous approval of the member states.) The bone of contention with Austria has been a new Czech nuclear plant at Temelin, 36 miles from the Austrian border. In January Jörg Haider, a right-wing Austrian politician who has made pro-Nazi statements, led a petition movement demanding that nuclear-free Austria veto Czech accession to the EU unless Temelin is shut down. Zeman's response was to publicly lash out at the 915,000 signatories of the nonbinding referendum , some 15 percent of Austrian voters , as "idiots" and to suggest that "the sooner the Austrians get rid of Mr. Haider and his pro-fascist party the better."

At the same time, Zeman raised hackles in Germany by asserting in the weekly Austrian magazine, Profil, that the 2.5 million ethnic Germans who were expelled from Czechoslovakia after World War II deserved their fate because they were "fifth columnists" who collaborated with Hitler. The ensuing controversy led German Chancellor Gerhard Schröder to cancel a visit to Prague. But Zeman remains unapologetic (see box, page 30).

In the economic realm Zeman's handling of the privatization process has underscored both his political resolve and his cranky unpredictability. The economy he inherited was suffering the consequences of the Klaus government's peculiar privatization program. In other Eastern European countries, Communist-era state companies were usually bought up by foreign strategic investors. But Klaus distributed vouchers to virtually all Czechs entitling them to free, newly created shares in the state companies where they were employed. The shares were then bought by investment groups , sometimes led by managers of those same state companies and sometimes by unscrupulous financial manipulators , whose political connections allowed them to borrow huge sums from state banks.

Initially, workers were as happy with this arrangement as their bosses. With few budget constraints, there was little pressure to hold down wages or employment rolls, so the jobless rate in the Czech Republic remained miraculously low compared to that of Hungary or Poland, where the transition from communism to capitalism was more wrenching. "It appeared that privatization was moving very quickly and smoothly," says Michal Rizek, an analyst at CA-IB Securities in Prague. "But soon enough the project turned into a complete disaster. There was a lot of fraud. Minority shareholders, rights were ignored. And the Czech image abroad suffered among foreign investors."

A more immediate problem was a banking crisis brought on by nonperforming loans linked to the "voucher capitalism." The Zeman government's response was to make the sale of banks to foreign investors a top priority. By last year nearly 90 percent of total banking assets were under the management of foreign-controlled banks. These include the three biggest Czech banks: Ceskoslovenská obchodní banka, or CSOB, which bought Investi cní a Po stovní banka, or IPB, making it the nation's largest bank, now under the control of Belgium's KBC Bank; Ceská Sporitelna, the second largest, purchased by Austria's Erste Bank der öesterreichischen Sparkassen; and Komercní banka, bought by France's Société Générale.

"The privatization of the banking system has definitely been one of this government's most important accomplishments," says Minister of Finance Jirí Rusnok.

The cost, however, has been onerous. To persuade foreign investors to buy the banks, the government, through its Czech Consolidation Agency, had to guarantee all nonperforming loans. Thus far the government has auctioned off less than $40 million of these bank debts, which amount to roughly $16 billion, equivalent to 28 percent of GDP. "The government has spent almost as much money covering the banks, debts as it received from the sale of the banks," says Senator Topolánek.

Nevertheless, the bank privatization signaled the Zeman government's firm intention to comply with the long list of economic reforms required for EU membership. And the prospect of Czech entry into the EU encouraged the tidal wave of foreign direct investment that has been largely responsible for economic growth in the past two years. "With EU accession a much more real prospect than it was in the mid-1990s, a lot of investors suddenly decided the Czech Republic was a good place to be," says the IMF's Nord. The largest investments , by Volkswagen and Toyota , have gone into automobiles and auto parts, a manufacturing sector in which the Czechs have long experience.

The steep price tag for banking reform opened the floodgates to privatization in other sectors. The government has been forced to accelerate the sale of state firms to help finance the growing public debt linked to the bank sales; last year began with the auction of a 66 percent stake in Prague water company Prazské vodovody a kanalizace to French conglomerate Vivendi Universal for $162.5 million , about twice the government's floor price. The year ended with the sale of Transgas, the country's natural gas pipeline network, to Germany's RWE for $3.7 billion, also considerably above government expectations. Altogether, almost $5 billion worth of state firms were sold in 2001.

But in recent months the government has stumbled in its efforts to sell the two biggest remaining plums: CEZ and Cesk´y Telecom. CEZ is 67 percent state-owned; the remaining shares are privately held and traded on the stock exchange. The power producer has 59 percent of the domestic market and exports electricity to Germany and Italy. Hoping to get a good price for CEZ, its state managers increased productivity. The labor force was reduced by 16 percent, or more than 9,000 workers, in 2001. Net income for the year reached $173.4 million on revenues of $1.59 billion, up from $157.5 million on revenues of $1.61 billion in 2000.

But the government has looked amateurish in its handling of the sale, insisting on conditions that have little to do with bottom-line business considerations. The winning bidder must contract to buy coal from state-owned mines for 15 years at a fixed (though not yet specified) price. The winner must also agree not to sell any of CEZ's major assets for at least eight years. To make these strictures more palatable, however, the new owner would also own the country's six regional distributors and its grid network , giving CEZ an even more dominant position in the domestic market.

But in the December auction, only one group , a consortium of Italy's Enel and Spain's Iberdrola , made a bid, for $4.54 billion. The government turned it down, declaring that it would accept no less than $5.6 billion for its shares in CEZ. "We are not a banana republic," Prime Minister Zeman declared at a press conference. "The government of the Czech Republic is no pushover for undervalued bids."

Government officials then set another auction date in January and strongly hinted that they favored Electricité de France. But the French company also failed to make a satisfactory bid, objecting especially to the coal clause.

Minister of Finance Rusnok now admits that the government fumbled the CEZ auctions because it let political and social factors influence the sale effort. "The energy sector is closely intertwined with coal mining, which is an important activity in the northern part of the country because of high unemployment there," says Rusnok. The government, he adds, did not want to sell only the most profitable parts of the electricity sector and get stuck with the money-losing ventures. "Maybe our privatization plan was too ambitious and we didn,t give ourselves enough time," he concedes. In any event, Rusnok confirms that further attempts to sell CEZ will be left for the next government.

Top managers at CEZ declined requests for an interview. But Daniel Castvaj, the marketing director, portrays the company as anxious to be sold to a large European entity "because we believe only four or five groups will survive in the European electric energy market." The $5.6 billion floor price the government set for CEZ isn,t excessive, maintains Castvaj, considering that the Temelin nuclear plant will be thrown into the deal. "Temelin alone cost us about 100 billion crowns [$2.8 billion], and it will be a very cheap source of energy," he says. But analysts suggest that the market is a better judge of CEZ's worth. "The price of CEZ shares on the Prague Stock Exchange is still lower than the bids that were made [per share]," notes Radek Mazác, an analyst at Czech investment bank Cyrrus Afin in Prague.

Cesky Telecom appears closer to privatization. But here again, government missteps have complicated the process and reduced potential revenues from the sale of the state's 51 percent stake. The next largest investor in the phone company, with 27 percent of the shares, is TelSource, a consortium of Dutch telecommunications company KPN and Swiss telecom Swisscom. Convinced that KPN, either by itself or in combination with Swisscom, would eventually buy the state's share in Cesky Telecom, the government dragged its feet on the company's privatization and concentrated instead on selling other state enterprises. Thus it missed a golden opportunity to sell the company at the top of the market, at several times the price it can command today.

By the time the government announced its intention to prepare Cesky Telecom for auction, telecom stocks had already begun to plunge amid the global dot-com meltdown. European telecom operators, having invested close to $100 billion in third-generation, or 3G, technology to wed the Internet to mobile phones, ran out of money and into huge debts. "The government relied too much on a single potential buyer , KPN , which in the end wasn,t interested in buying Cesky Telecom," says CA-IB Securities, Rizek. In fact, rumors have it that money-strapped KPN is so anxious to sell its Cesky Telecom holdings that it might not wait for the government to arrange an auction , a move that would lower the Czech telecom's share price.

In recent months Prague has tried to make sure that TelSource , the KPN-Swisscom consortium , is at least on the same page as the government as the privatization of Cesky Telecom moves forward. "The sale of Cesky Telecom is taking so long mainly because we have had to resolve our contract obligations with TelSource," says Minister of Finance Rusnok, who offers no more details. For their part, Cesky Telecom executives insist that they can,t comment before the auction.

Among the potential bidders are Germany's Deutsche Telekom, France's Orange, and a consortium of Warburg Pincus from the U.S. and Doughty Hanson & Co. and Apax Partners of the U.K. " Cesky Telecom has certain attractions," says Michal Susak, head of the Prague office of Credit Suisse First Boston (Praha), which is advising the Warburg Pincus consortium. "Its fixed-line business is dominant, and it's also strong in wireless. But it needs further efficiencies, which can be introduced by new financial sponsors."

Cesky Telecom, which has a market value of about $2.7 billion, is a monopoly. It owns 95 percent of the country's fixed-line phones and 51 percent of Eurotel Praha, the leading mobile phone operator. It had a net income of $167.2 million on revenues of $1.53 billion in 2001, compared with $160.5 million on revenues of $1.5 billion in 2000. To make itself more attractive to potential bidders, Cesky Telecom has raised its monthly fixed-line fees 70 percent and increased its per-minute charges 3.7 percent. Rusnok predicts that the company will be privatized by the time the government steps down in June.

But that same month could bring some bad news for the government in the form of a whopping liability payment. Prague may be forced to pay damages claimed by Central European Media Enterprises, or CME, a company owned by Ronald Lauder, the U.S. cosmetics billionaire who is chairman of Estée Lauder International (Institutional Investor, January 2000). In partnership with Vladimir Zelezny, a celebrated Czech journalist, CME launched a new Czech television station, TV Nova, which soon drew almost 70 percent of viewers.

But in 1999 Lauder fired Zelezny after many stormy disputes. Zelezny, who controlled TV Nova,s broadcasting license, insisted he was the station,s true owner and began operating it as part of his own company. Lauder contended that he had been robbed and blamed the Czech government for not protecting his investment. Last September the London-based International Court of Arbitration ruled in Lauder,s favor, and by June the court is to determine what amount the Czech government owes in compensation. "We allege that the fair market value of TV Nova today is over $700 million," says Fred Klinkhammer, CME's chief executive officer.

"The TV Nova case is very unfortunate," says Rusnok. "However, it is an issue between a foreign investor and a Czech company, and I,m convinced that the Czech government is not to blame for the damages that [Lauder] is claiming."

Since a new government should be in place by the time the court names a sum, neither Rusnok nor Prime Minister Zeman will have to decide whether to accede to the ruling. "It would raise enormous questions in the minds of foreign investors if they saw that the government refused to pay an amount decided by an international court," warns the American Chamber of Commerce's Stacey. Many investors, however, seem to treat the TV Nova episode as an aberration.

"This government has been extraordinarily successful in attracting foreign investment," says Ramiro Cibrian, the European Union's ambassador to Prague, who is monitoring the Czech Republic's compliance with the economic, political and legal standards necessary to gain EU membership by 2004. So much money has poured into the country, in fact, that the Czech crown is one of the few currencies to have risen against the dollar.

"You know, our nickname for the Czech crown is ,Rocky, , because it has proved to be so unexpectedly tough," says Prime Minister Zeman. "Some people say we should be worried because our currency is too strong. But I say it's the ultimate proof of the success of our economic policies."

Rocky, of course, was a movie with many sequels. And Zeman, only 57, may be intending to stage one of his own. He has hinted that after a yearlong retirement he might run for president in 2003 when Václav Havel, the ailing hero of the Velvet Revolution that ousted the Communists, completes his second term. Although the presidency is largely a symbolic post, it's a big enough podium for Zeman to continue to deliver an earful to his compatriots and EU neighbors.

Zeman on Zeman

Czech Prime Minister Milos Zeman has never subscribed to the go-along-to-get-along philosophy of most politicians. As a young economist, he joined the Communist Party in the spring of 1968 but by that summer was expelled for supporting Alexander Dubcek, whose brief reformist government was toppled by the Soviet army in August 1968.

Over the next 20 years, Zeman was fired from almost every one of his jobs for political reasons. But he was active in the Velvet Revolution of 1989 that overthrew the Communist regime, and the following year he was elected to Parliament. In 1998 Zeman became prime minister.

The tall, burly 57-year-old Social Democrat sat down recently for an hourlong interview with Institutional Investor correspondent Jonathan Kandell in Prague. Zeman's cramped offices are in the lower house of Parliament, a labyrinthine former palace dating to Renaissance times. With his usual mix of bluntness and humor, the chain-smoking Zeman talked about his accomplishments and failings, his rivals and allies, and the rationale behind his sometimes erratic political style. Though he will retire as prime minister after this June's elections, Zeman hints that he might run for president of the Czech Republic when Václav Havel's second term ends next year. This would infuriate Zeman's ostensible ally, Václav Klaus, the conservative former prime minister who wants to be president himself. Zeman's minority government survives only because of an informal pact with Klaus,s center-right Civic Democrats, but Zeman has never hidden his dislike of Klaus or his party.

Institutional Investor: What was your biggest surprise upon becoming prime minister?

Zeman: I would mention three. First, the banking sector. Its problems were much worse than I had imagined. We,ve spent a lot of time and energy correcting them, and I think the reform of banking now stands as one of the most important accomplishments of my government. Another surprise was our ability to bring down crime rates. The government [of prime minister Klaus] declared that rising crime was a "tax" that we Czechs had to pay for liberty [after the fall of Communism]. I insisted that it was simply evidence of the total incompetence of the previous minister of the Interior, who was responsible for the police. And in fact, in the past three years, crime rates have fallen dramatically. A third surprise has been the flow of foreign direct investment. When I came into office, we were well behind Poland and Hungary. Now, per capita, we are first in the region.

What has been the biggest disappointment of your term?

Our campaign against economic [white-collar] crime. We thought that by appointing a commission we could solve the problem within a year. We lost a lot of time. But we have made gains recently against corruption, money laundering and other economic crimes.

The Social Democrats were not considered to be enthusiastic about the private sector, so what made you push so forcefully for privatization?

The previous government carried out "voucher" privatization, which I would call capitalism without capital. Owners of new businesses had no money, so they used their government connections to get bank loans that they never repaid. We consider those owners criminals, not entrepreneurs. Some ended up in jail. But all those bad loans forced us to privatize the banking sector in order to save it. Because there was a total lack of domestic capital, we have sought foreign capital in many other economic sectors as well.

What is your opinion of the European Union,s "report cards" on the the Czech Republic's economic progress toward joining the EU in 2004?

A lot of soft advice for hard money. There are two basic principles that are necessary for stable economic growth: First, investment must rise faster than consumption, and second, productivity must increase more quickly than real wages.

Considering that you need the strong support of Austria and Germany to gain EU membership, do you think you were unnecessarily provocative in your disparaging comments about Austrian right-wing politician Jörg Haider and the Czech Republic's Sudeten German minority?

I believe in moving beyond the past and looking toward the future. But if I hear voices from that past, I must react. Mr. Haider is a man who said publicly that many SS men were decent people, that concentration camps weren,t all bad, that Hitler had excellent employment policies and so on. As for the Sudeten Germans, they are proposing that villages and towns where they live use names in two languages , Czech and German. I consider that the height of arrogance. As you know, my nation was condemned to eventual genocide by the Nazis, who were helped by the Sudeten Germans, and we avoided that fate only because the Germans lost the war.

By announcing your retirement so far in advance, don,t you risk being viewed as a lame duck?

I wanted to allow my fellow Social Democrats plenty of time to select my successor. They accepted my recommendation , Vladimir Spidla, who is deputy prime minister [and minister of Labor and Social Affairs] , and this has helped maintain political stability for the party and the country. I don,t think this has weakened support for my economic policies. On the contrary, it ensures they will continue.

Why retire at your age?

I am a very lazy man who unfortunately was forced to work very hard. I completed the two main tasks I set out to do in politics: First, to transform my very small, marginal Social Democrats into a party that wins elections; and second and far more complicated, to reverse this country's economic decline and point it toward prosperity. But all this work hasn,t changed my basically lazy nature. I have a two-room cabin in the mountains, and I intend to go skiing, take long walks in the forest, drink Becherovka [a spice-based Czech liqueur] and read a lot.

Are there any circumstances under which you would run for president after Václav Havel steps down in 2003?

As you know, we elect our president through a vote of Parliament instead of by direct popular vote. I can imagine a situation in which no candidate receives the support of a majority in Parliament. Only under a crisis of this type would I consider running.

Prince of capitalism

On a typical morning William and Alexandra Lobkowicz, expats from suburban Boston, drop off their two eldest kids at school in Prague, and then drive their Volvo station wagon to work, a 30-minute commute past farm fields and factories. That's where any resemblance to the routine of American soccer parents ends. Work is at Nelahozeves, a 16th-century, 100-room Renaissance castle. The Lobkowiczes oversee an art collection that includes paintings by Brueghel, Canaletto, Cranach and Rubens; rare sets of porcelain and glass from Bohemia, Germany, Italy and the Netherlands; a vast inventory of precious gold and silver objects, jewelry and clocks, intricately inlaid chests and cabinets; and a library of 65,000 rare books.

All this treasure and Nelahozeves itself belongs to the Lobkowiczes, as does an even larger castle (265 rooms), Roudnice. Twenty minutes north of Nelahozeves, it is where Beethoven and Mozart composed and performed some of their most famous works. And further north still, there is Strekov, another Lobkowicz castle, which inspired Wagner to compose his opera, Tannhäuser.

Until the Communist takeover in 1948 turned them into refugees, the Lobkowiczes had figured prominently for six centuries as Czech aristocrats, statesmen and cultural patrons. But William's father, Martin, a Boston stockbroker who grew up in Roudnice castle bicycling between its far-flung chambers, told his three children to abandon any hope of recovering the family's fabled past and to think of themselves as middle-class Americans. Martin even admonished relatives back in Prague not to address him as "prince" in their correspondence. "First, he reminded them that aristocratic titles had been abolished after World War I," says William. "They only stopped when he told them that ,Prince, was the name of a popular spaghetti brand in America, which might make him the butt of jokes among neighbors."

But the Lobkowiczes, existence as anonymous, suburban Americans ended in 1990 when Czech Republic President Václav Havel announced that all properties expropriated by the Communists would be returned to their rightful owners. The new democratic regime,s attitude toward capitalism was being closely monitored by foreign investors. Returning castles to aristocrats , the bogeymen of Marxists , was the best way to impress upon capitalists that private property was once again sacred in Czech territory.

As the oldest son, William, then a 29-year-old real estate broker and former bank trainee with a European history degree from Harvard University, was delegated by his family to move back to the old country and take possession of the vast Lobkowicz estates. He faced a daunting task. "Nothing in my background prepared me to manage such a diversified portfolio of national treasures , and with no cash," says William, now 40 and a Czech citizen with a fluent command of the language.

From the beginning, he looked upon the Lobkowicz estates mainly as a cultural trust. "Besides, castles are too drafty to live in," says William, who instead resides with his wife and three children in a modest, detached town house on the outskirts of Prague. With the help of his family back in Massachusetts, he created a nonprofit foundation to raise funds among Czech-Americans to restore the Lobkowicz collections and open them to the public. Of the nine castles returned to his family, William sold six to help maintain and improve the remaining three: Nelahozeves (where the collections are on display), Roudnice (rented out to the Czech army as a music school) and Strekov ("It's just a ruin, so the upkeep is very low," says William, only half in jest).

Not all of William's energies are devoted to nonprofit cultural activities. He has revitalized the family brewery, which dates back to 1466, and now profitably markets three brands of beer in the Czech Republic and abroad. He also sells wine from the Roudnice vineyards, founded in 1603. But the biggest source of revenue comes from renting out the ground floor of Nelahozeves , including the Knight's Hall, with its massive carved stone fireplace, 16th-century frescoes and coffered ceiling , for social gatherings, gala dinners, concerts, recitals, business conferences and company presentations. Among the clients are almost every Wall Street firm and blue-chip American and European manufacturers with operations in the Czech Republic.

For an extra fee, according to the promotional literature, they will get a 20-minute welcoming address by "Prince" William Lobkowicz. Apparently, the title has been unofficially resurrected in the entrepreneurial spirit of the new age.