Czech Constitutional Court cancels another part of government’s austerity package

The Czech Constitutional Court has abolished another part of the government’s austerity package. The court on Wednesday ruled invalid the taxation of state support for housing-related saving plans, arguing it was approved in breach of the constitution. This is the second time the court thwarted the government’s plans to bring down this year’s budget deficit. Wednesday’s verdict made President Václav Klaus lash out against the court, accusing it of interfering with politics.

Social Democrats' leader Bohuslav Sobotka, Pavel Rychetský, photo: CTK

The Czech centre-right government was planning to save up to six billion crowns this year by imposing an extra 50-percent tax on state support for individual housing-related saving plans.

But last November, when the legislation was approved, the government was pressed for time and had the bill pushed through Parliament via a legislative shortcut, with no debate on the floor. That made the opposition Social Democrats challenge the act at the Constitutional Court, which on Wednesday ruled the legislation invalid. The court’s Chief Justice Pavel Rychetský explains why.

“The way it was approved was in breach of the Constitution because there were no extraordinary circumstances, such as war, a threat to people’s rights and liberties, or a risk of extraordinary damages. So there was no reason to pass the bill in several hours or days’ time, without a proper debate.”

Miroslav Kalousek, photo: CTK

Another problem, Justice Rychetský said, was the retroactivity of the act as the cuts would affect state incentives for 2010.

Around five million Czechs, half the country’s population, have individual housing saving accounts. The incentives were introduced in the early 1990s to boost housing construction, and to help people reach mortgages.

The court’s decision will make a six-billion-crown dent in the state budget so the government will have to save elsewhere to keep the deficit at 135 billion crowns, or 4.6 percent of the country’s GDP. Finance Minister Miroslav Kalousek hinted where the government might look to fill the gap.

“It’s up to me to come up with several possibilities of how to fill the gap in the budget, and I want to do it in the next two weeks. It is probable that some public services will have to be slashed – regional development subsidies, operational costs of some government programmes or something like that. One of the public services included in this year’s budget will simply have to be dropped.”

This was in fact the second time the court thwarted the government’s cost cutting plans. In March, the court ruled invalid a series of cuts in family support and welfare worth around 30 billion crowns but it gave the government until the end of the year to have them reapproved in a proper way.

Václav Klaus

Wednesday’s ruling was not unanimous, as five of the court’s 15 judges disagreed with their colleagues. But it still angered President Václav Klaus, a long standing critic of the Czech judiciary. Mr Klaus accused the Constitutional Court of acting beyond the Constitution, and said the court now effectively operates in the political arena.