Anti-crisis package sparks debate
The government has unveiled the main part of its plan to cushion Czechs from the worst of the world financial crisis. In the process, it has stirred up a fierce debate about whether it has made the right diagnosis of the problem and found the right cure.
The government remedy is basically this: in a small, open, export-oriented economy it makes better sense to help save threatened companies and jobs rather than trying to boost domestic growth by spreading perks and cash around the population. Authors of the 41.5 billion crown package say the mix of measures, including faster and more generous tax write offs for companies, lower social charges on employers and aid for on the job training will save jobs.
Prime Minister Mirek Topolánek says this and other measures already taken could add up to a 4.7 percent stimulus for the suffering economy. He told Czech Television where some of the benefits could come.
“Of course maintaining employment is one of the main motives of this whole raft of measures. We can already estimate today that some steps such as the construction of ecological infrastructure or buildings could, according to conservative estimates, create from 12,000 to 20,000 work places according to the National Anti-Crisis Plan analysis. Then there are measures such as those aimed at stimulating businessmen to conserve low paid jobs. These measures to cut social insurance payments for low earners could, according to analysis by the Ministry for Labour and Social Affairs, safeguard between 50,000 and 70,000 jobs.”
Mr. Topolánek believes the measures are jusfied in themselves and because of the similar steps being taken in neighbouring countries.
“I must say that this raft of measures could have been carried out even if there was not the threat of such a collapse. We are working on a scenario of 0 to minus two percent growth even if the latest prediction from the central bank is from 0 to minus 0.3. I am sure it would have been difficult not to do anything like this because of what is taking place around us and because there is a certain competitive environment. But I am convinced these measures are targetted and so is the plan.”
“We are very unhappy that the Czech government after many, many months, waited for some reaction. Now we have some anti-crisis plan. We feel this plan is about 60 percent positive for us but 40 percent is for us very difficult to accept for the future. There is especially one thing, that is the reduction of 1.5 percent of social insurance because we think this is not a good way. It is better to use the 18 billion crowns for support of the Czech economy rather than reducing these figures at a company level.”
But Confederation of Trade and Industry economic advisor and head of external affairs for the country’s biggest exporter, Škoda Auto, Radek Špicar, is upbeat about the package. And he says cutting companies’ insurance payment is one of the plan’s strongest points.
“The so-called indirect costs of labour is very high compared with other EU countries and the labour unions have been opposing this step for a long time. So it was no surprise they protested this. But I think it is one of the best measures presented in the anti-crisis package and I think it would really help. It will not be cheap, it will cost the government a lot of money. But I think it could be really effective because during the crisis one of the things you have to do is to make the labour force cheaper because that will enable us employers to keep our employees despite the fact that our production may be limited because of the lack of demand on foreign markets.”
Union boss Josef Středula also suspects the government of trying to use the crisis to launch an assault on workers’ rights by pushing through changes to existing labour laws in the name of increased flexibility. And he warns that unions will fight hard to protect those rights.
“We are prepared to start some demonstration activities and other steps. We feel that the Czech employees are not the reason for the start of the economic crisis.”
“I must say that we as companies, as businesses in the Czech Republic, welcome this package and think it is well structured and includes well selected measures that can actually help the economy during the crisis. It basically includes most of the measures we proposed the government should implement as a Confederation of Trade and Industry. Overall we were pleased by the package and think the government has done a good job.”
But is it all too little, too late?
“It is not too little because first of all you have to keep in mind we should try to stick to Maastricht criteria [for adoption of the euro]. So I would not support any destabilisation of public budgets for example. So I do not think it is too little. Secondly, well yes, I can agree it is too late. When you take into consideration that Poland adopted and approved its anti-crisis package in November last year, it is clear that it took us too long to prepare our package.”
But with daily signs of a deepening crisis, KOVO’s Středula believes the government will have to patch up another crisis programme before long to make up for this one’s shortcomings.
He fears the unemployment rate will go up within the next six months and will hit nearly 10 percent.
“This is a very bad number for the Czech Republic, but I still hope this number in the future will not be true. But these numbers from the real economy are very bad, for example, today I have information from one company in Southern Bohemia today reduced the number of employees by minus 120. Tomorrow in the same company it will be minus 100. Another company, this is a supplier of the auto sector, will close completely and that is minus 350 workers. These numbers are very bad and I think will be worse than they are today.”
The far reaching argument is likely to rumble on until what looks like being a stormy debate in Parliament next month. And with government and opposition struggling to agree on anything, the crisis plan could find itself laid up as well.
