ERROR 1298 (HY000): Unknown or incorrect time zone: 'Europe/Prague'

Firstly you have to import timezones into mysql database

mysql_tzinfo_to_sql /usr/share/zoneinfo/|mysql -u root mysql
mysql_tzinfo_to_sql /usr/share/zoneinfo/Europe/Prague Europe/Prague | mysql -u root

Now you can run

SET GLOBAL time_zone = 'Europe/Prague';

You can edit my.cnf/utf8.cnf and add

[mysql]
default_time_zone = Europe/Prague

More to read about Timezones