Major battle looming over indexation of old-age pensions

The Czech government is facing a major battle in the lower house over a bill which would reduce the indexation of old-age pensions. While the cabinet argues the need to economize, the opposition says the government is hurting the most vulnerable group in society at time of “brutal inflation”.

Petr Fiala | Photo: Office of Czech Government

The Fiala government on Monday announced that due to the growing deficit in public finances it had decided to cut back on the regular indexation of old-age pensions guaranteed by law according to the given measure of inflation. The bill, which would enforce this, was approved in a state of legislative emergency so that the cuts effected would save 19 billion crowns from state coffers this year alone. Prime Minister Petr Fiala said the growing expenditures for old-age pensions had become untenable and the state could not continue to run up a debt that would have to be paid for by future generations.

“We felt the need to revise the set mechanism with regard to intergenerational solidarity and with regard to the need to ensure sustainable development in the years to come.”

Alena Schillerová | Photo: Michaela Danelová,  archive of Czech Radio

The move has raised an outcry from the opposition, which says the government is taking money from the most vulnerable group of society, a group which can least afford it and which moreover has no economic leverage by which to protest. The opposition ANO party and the Freedom and Direct Democracy party have both said they will use all available means to block the bill in the lower house, threatening to filibuster for days if needed. The head of the ANO deputies’ club Alena Schillerova told the media the party was prepared to “raise hell” to stop this measure.

“This country is experiencing brutal inflation and pensioners are particularly vulnerable. It is clear that the government waited until after the presidential elections to announce this highly unpopular move.”

Constitutional Court | Photo: Tomáš Adamec,  Czech Radio

The opposition parties both claim that the government’s decision is unconstitutional and say they are ready to file a complaint with the Constitutional Court if the bill is approved.

Constitutional lawyers generally agree that the decision is legally dubious and that if it is challenged in court the verdict could invalidate the bill in question. They also argue that the government had little justification to approve the measure in a state of legal emergency.

Moreover, leading economists say the Czech government’s plan for a one-off old-age pension measure is unsystematic and question the wisdom of the move at a time when the government is said to be working on an overhaul of the whole pensions system. And, president-elect Petr Pavel, who will be expected to sign the bill into law has not yet indicated whether he would be prepared to do so.

The debate on the bill in the lower house is to commence next Tuesday and the ruling coalition, which has a solid majority in both chambers, is getting ready to ride out the storm. However, even if the bill is approved, it is certain to remain in the spotlight due to planned street protests and the likelihood of legal action against it.