Government crisis impacts 2013 state budget

The lower house of Parliament on Wednesday returned a bill on the 2013 state budget to the finance minister for re-drafting after the cabinet was unable to win support for a package of proposed tax hikes, forcing it to abandon the original budget draft proposal. The finance minister has promised to re-submit the bill within 30 days, amidst growing uncertainty as to whether the government will manage to survive a confidence vote in the lower house next week.

Miroslav Kalousek, photo: CTK

It is a nightmare scenario for any finance minister. On the day that that the lower house opened debate on next year’s state budget he was forced to request its withdrawal on the grounds that the macro-economic figures did not tally. With six Civic Democrat rebels holding out against a package of proposed tax-hikes it was clear that there was a 20 to 25 billion crown hole in the draft budget. Much against his better judgment Finance Minister Miroslav Kalousek said he would slash expenditures and warned that it would hurt.

“I am not prepared to submit a budget with a bigger deficit in public spending, which means that the loss in revenues will have to be made up for on the expenditures’ side. This will affect the infrastructure, the education sector, the police and the military. It will mean cost cutting in areas which in my opinion have already been cut to the bone.”

The finance minister will not know for sure until next Wednesday what parameters he will be working with. The fate of the proposed package of tax-hikes which is due to go into its third and final reading next Wednesday remains highly uncertain with various proposals still up in the air. Given the fact that, in an effort to increase pressure on the rebels, Prime Minister Petr Nečas linked the bill to a confidence vote in his centre-right administration it may even bring down the government.

Michal Hašek, photo: Filip Jandourek / Czech Radio

The opposition Social Democrats, who have slammed the ruling parties for dragging out the uncertainty regarding next year’s taxes, are all too ready to cooperate in helping to pass next year’s budget on condition that the ruling coalition bows out. The Social Democrats’ deputy chair Michal Hašek made his party’s condition clear on Wednesday night.

“The Social Democrats are being very open about this. We are ready to reach a compromise on next year’s state budget on condition that the lower house agrees on early elections.”

Although the embattled prime minister is still negotiating, there is no denying that his party is in disarray and that the ruling coalition has lost its majority in the lower house; this at a time when next year’s budget has not been approved, the pension reform has been shelved and there is talk of reviewing the church restitution law because there would be no money to implement it.

Photo: archive of CRo 7 - Radio Prague

The first big test will come next Wednesday when the government may fall in a confidence vote. If it manages to survive, there will be the Civic Democrats election conference on November 2nd and 3rd, which may change the face of the party. The Civic Democrats’ coalition partners are now waiting to see the force that emerges and whether the ruling parties will still have a common policy programme and a majority in the lower house.