Minister: revised budget worse option than VAT hike

Miroslav Kalousek, photo: CTK

Finance Minister Mirsolav Kalousek stirred the political waters considerably on Monday in presenting his revised draft state budget for 2013. The bill shocked many within both the government and the opposition by proposing billion crown cuts in high priority areas such as infrastructure and education.

Miroslav Kalousek,  photo: CTK
Miroslav Kalousek has made clear that when it comes to reducing the deficit to under 3 percent of GDP he intends to stay the course, even at the risk of making largely unpopular cuts the opposition argues will cripple, not boost the economy and send it into the tailspin of a second recession. At the centre of the revised state budget – and the latest uproar – is an expected loss in revenues as well as budget cuts totalling 41 billion crowns. And it is the cuts, in key areas such as science and research, transport, EU co-funded projects, teachers’ salaries and education, which have attracted sharp criticism. Academics and even government ministers slammed the proposal on Monday, calling the cuts unacceptable; the opposition, meanwhile, suggested a government willing to cut in these areas deserved “no mercy”.

Later, deputy Social Democrat leader Lubomír Zaorálek, said the move was, in a way, predictable.

Lubomír Zaorálek,  photo: Tomáš Adamec
“I’m not surprised that the finance minister has taken the steps he has taken because we have gotten used to his approach: we don’t actually have a a finance minister but a ‘minister of spending cuts’. Over the last two weeks we have seen him reduce spending by 41 billion crowns just like that. We have pointed out that the problem is elsewhere: the minister should focus on increasing revenues, namely in the area of taxes. That’s not raising taxes, but finding ways of making sure taxes are not avoided and find their way into state coffers.”

The finance minister though has continued to argue there was no other option, leading to charges he was wielding the revised budget as a political tool to push through government-proposed tax hikes which would render proposed cuts in the revised budget superfluous.

“...The [revised budget] is worse for the Czech economy than the previous draft budget which I was forced to withdraw. But the failure to pass the earlier tax package can have only two logical outcomes: either we increase the deficit – which is absolutely unacceptable for this government – or we make cuts in spending even in areas we never intended to touch.”

Photo: archive of CRo 7 - Radio Prague
There is still a chance that a deal on the original draft budget can be reached by passing the tax package, avoiding the revised version: among the rebellious six within the Civic Democratic Party, there is now indication at least some will back down: two deputies have indicated they might leave the assembly hall during Wednesday’s vote; and the former education minister, MP Josef Dobeš, now in the opposition, has also said he will back Wednesday’s proposal. If that proves to be true, the government is far likelier now than just 24 hours ago to not only get its austerity package but ultimately to survive.