Former Prime Minister Vaclav Klaus calls on the government to put public finance in order

Vaclav Klaus, photo: CTK

Amid heated debates regarding next years state budget and the growing deficit former Prime Minter and leader of the opposition Civic Democrats Vaclav Klaus has called on the government to take action to prevent a fiscal crisis in the Czech Republic.

Vaclav Klaus,  photo: CTK
On the eve of parliamentary debate regarding next years state budget, Vaclav Klaus made a timely gesture. In cooperation with the Czech Non-Governmental Think Tank - The Center for Economics and Politics - Mr. Klaus, one of the architects of the Czech economic transformation, released his study entitled Problems in Czech Public Finance at the beginning of a new decade. Over the past 10 years the public finance situation in the Czech Republic has continually worsened, where the public finance deficit stands at almost 6% of GDP. I spoke with Mr. Klaus about his latest study.

"Well we have a problem with our fiscal policy, with our state budget of the Czech Republic. We just now have a discussion in the parliament, and I tried in cooperation with one of the first Czech think tanks, CEP - Center for Economics and Politics. I tried to put the whole issue of the current state budget in a broader perspective of public finance. So, I tired to figure out and stress the main issues that we have to solve before solving our more or less fiscal crisis that exists in the country now."

The budget deficit has almost doubled since last year and its expected to continually rise. What do you think needs to be done to reach a surplus or to at least balance the budget?

"Well first the government must accept the problem as such. It seems to me that the government is not ready to accept it and they passively expect future development. Number two, you can not change the budget totally tomorrow morning. As the former minister of finance of the country I know quite well. So, the government must introduce and prepare a document that I would tentatively call the medium-term consolidation program of Czech public finance. And to suggest ways how to solve the problem. In the short-run it cant be solved. In the short run you can make small changes which may make the deficit smaller, but such changes can not change the problem. So we must prepare a medium-term strategy and to suggest the year 2005 or 2004 as the final year of the consolidation to suggest step-by-step procedures on how to behave rationally in the public finance sphere."

Incidentally, earlier this week the international credit rating firm Standard and Poors decreased the Czech Republics credit rating by one level citing the worsening fiscal situation in the country and governments unwillingness to adopt the necessary but highly unpopular reforms.