MPs pass austerity package for 2010

On Friday the Czech Parliament’s lower house passed an austerity package, designed by the interim government to curb next year’s budget deficit. After two days of squabbling, the main political parties reached a compromise and approved the cost-cutting measures, setting the country’s budget deficit for 2010 at 5.2 percent of GDP.

After two days of fierce controversy and one night of behind-the-scenes negotiations, Czech MPs finally approved an austerity package that will bring next year’s deficit down to 162.8 billion crowns, or just over 9.5 billion US dollars. The head of the caretaker government, Jan Fischer, said that he would resign if MPs failed to approve the measures. Otherwise, the deficit would have been an alarming 230 billion crowns. After the vote, Mr Fischer said the final compromise was a good one.

Jan Fischer, photo: CTK

“I think that our rationality provided us with a route out of an unacceptable budget deficit of 230 billion crowns to one that will prevent the extreme problems we would otherwise be facing. It’s a compromise, of course. Some of us will leave unhappy, some disappointed; I am leaving today as a man who believes the compromise is a fair and decent one.”

Among the disappointed are the Social Democrats and the Communists, who objected to cutting expenditures, particularly in social benefits and pensions. Although Social Democrat leader Jiří Paroubek originally supported the bill, he then changed his mind, and on Thursday his party’s MPs looked set to vote against it. But then Mr Paroubek completed a kind of double u-turn and his party in the end supported the bill, albeit with some minor changes. Jan Macháček is a commentator for the weekly Respekt.

“It’s definitely important that we can see a sign of politicians finally being able to reach a consensus, and put us on the way to approving the budget. Having the budget approved in time is a sing of the country being governed rationally, I’d say. Without a budget, we would really be on the road to chaos.”

Jiří Paroubek, photo: CTK

The deficit will in the end be higher than the 155 billion originally proposed by the finance ministry. But Jan Macháček says that the most important thing is the fact we now have the prospect of the state budget being passed.

“I don’t think detailed numbers are that important. The world economy and European economy, on which we are extremely dependant, is not as volatile as it was a year ago. Arguing whether this measure or that measure will lower or increase the deficit by two or four billion crowns – it’s not that important really.”

With the austerity package approved and out of the way, Prime Minister Jan Fischer said his government would present a draft of next year’s budget to the lower house next week.