Expert: Govt. budget reforms “relatively solid compromise”
This week the Czech government announced a major package of economic legislation aimed at reducing the country’s record budget deficit. The move, which includes a largescale pension reform, is intended to save CZK 94 billion in 2023 and close to CZK 150 billion by 2025. I asked politics professor Vít Hloušek from Masaryk University in Brno what he makes of the government’s announcements and approach.
“I think that the time is right to announce such cuts, or such reforms.
“First of all, it was expected long ago. The government had declared from the outset that this was an item on their agenda, namely to cut Czechia’s budgetary deficit.
“Then, we have to take the electoral cycle into account. If they were to delay these reforms by six months or a full year then they would risk that no positive outcomes will emerge before the next elections into the Chamber of Deputies.
“Now they have a chance to demonstrate that it really works.”
Speaking on Thursday, Prime Minister Petr Fiala said that the fat years were over and that the lean years were ahead. The opposition has criticised the austerity measures as brutal. What are the risks for the government involved in presenting such a plan, and do you think Czech society is ready to accept these reforms?
“You are right that politically it is a very complicated issue and the governmental parties are at risk of losing some of their voters.
“On the other hand, the opposition would criticise governmental policies or even the lack of activity, so I wouldn’t say that it’s such a big deal.
“Some reforms are necessary. Economic experts are united in saying that the country’s government needs to enact some cuts to balance the budget.
“When we take the pensions reform into account we have to take note that it’s also part of a debate that has been going on for two decades, so the government would be criticised anyway.
“Now, by announcing these reforms, there still is a chance to make some positive impact and fight back the opposition by showing that it works.”
You mentioned that a lot of experts said that this was necessary and that they were in agreement. A significant part of the government plan was born out of the advice of the National Economic Council, a group of independent experts who advise the government on economic issues. The current government is largely a centre-right coalition led by the Civic Democrats. Do you think their voters are also likely to be satisfied by these measures? It is a fact that, for example, some of these reforms will also impact businesspeople.
“It could be like that. On the other hand, if you look at the voters of the Civic Democratic Party then you see that they are not just businesspeople but a variety of different parts of society. Some people vote for them for ideological reasons, others feel that they represent their business interests, so it isn’t so easy to gauge how their voters will react to the reforms.
“You are right in saying that nearly every segment of Czech society is going to be touched by these reforms, but we also have to admit another important issue: This is the result of a very complicated negotiation. The ruling coalition is made up of five parties who have diverging views on many economic policies.
“Therefore, from the point of view of the political process itself, this is a positive outcome.”
You seem very optimistic, or at least positive, about what happened on Thursday. Is there something that you do have reservations about?
“Well, I am optimistic about the set-up of the reforms. I am far less optimistic about their implementation.
“One thing is to announce that I will, for example, cut the funding for private funding for companies by CZK 55 billion. Another is to prepare the necessary legislation, to reduce these payments and decide what exactly is going to be cut.
“I therefore expect that there will be many complications and issues on the way towards the implementation of these reforms.
“However, as I said, when I take the political debate that has been going on at least since the Russian invasion of Ukraine into consideration. I can see the outcome, the package of reforms, as a relatively solid compromise.”