Coalition agrees final chapters in cost-cutting government programme

Negotiating teams from the three parties who will form the next government finally closed the final chapters of their coalition agreement on Wednesday, paving the way for reforms aimed at improving the country’s public finances. It’s civil servants who will bear the brunt of budget cuts, although all citizens will find themselves digging deeper into their pockets with changes to state benefits and VAT.

Photo: Barbora Kmentová

Clerks and soldiers appear to be the greatest losers in the government’s plan to cut the country’s burgeoning budget deficit. The incoming centre-right cabinet has set itself the ambitious goal of a balanced budget by 2016. It wants to begin by saving around two billion euros next year, and in short that means paying state employees less or sacking them.

Ministers will be faced with the choice of cutting salaries in state sector by 10% or laying people off. That will be felt immediately in the armed forces. The smallest party in the coalition – Public Affairs – demanded that 80 million euros be moved from defence spending to education. To make that happen, all soldiers will face a five percent pay cut and lose one third of their travel allowance. There will be similar cuts in many other state sectors.

The reforms will trickle down to all citizens, regardless of whether they are state employees or not. The government plans to increase the lower band of VAT from January 2011, from 10% to 11% or 12%. That means food, medicine, transport, theatre and film tickets, hotel rooms, books and so on will all become more expensive.

Czech university students will also start paying tuition fees, of up to 780 euros per year depending on how well paid their chosen profession is. Students will be able to choose whether to pay as they study or take out a student loan after they graduate. The government also wants to save about half a million euros in state benefits, meaning cuts in child support, paid maternity leave, unemployment benefit and so on.

The good news – there is some, although not much. Starting salaries for teachers will rise to 780 euros. Doctors who invest in their qualifications will be rewarded financially. And people earning over 2,800 euros gross per month will pay lower compulsory state pension contributions to make the system fairer, seeing as the state can’t actually afford to pay them higher pensions.