Helena Horská: “If you don’t feel safe, you won’t do business”
The Czech government has approved a budget with a high deficit, and President Petr Pavel says he will sign it—despite reservations that more should go to defense. Helena Horská, chief economist at Reiffeisenbank, argues the key question is not just how much is spent, but how. She told Radio Prague International that defense spending can make economic sense—if it is treated as investment.
The Czech debate about public finances often avoids uncomfortable truths—whether about so-called “free” public services or the need to invest more in defense:
“The main problem is that we keep telling people they are entitled to state-funded healthcare, education, social services, and so on—but we are not telling them the truth. It hasn’t been free for a long time,” she says.
“In fact, we are trying to soothe people by saying that we need to increase spending in these areas, but we are not telling them that it is only a matter of time before significantly more private money will have to flow into healthcare.”
Horská warns that Czechia may already be experiencing a gradual shift toward privatization—without openly acknowledging it.
“If we don’t want to follow the Slovak path—where healthcare has effectively been privatized from the bottom up and the public system barely functions or is not available within a reasonable timeframe—we cannot avoid this. The same applies to education. Many households already send their children to private schools because public capacity is insufficient. This is the kind of creeping privatization that is already happening.”
Defense spending as an economic opportunity
At the same time, pressure is mounting to increase defense spending—not only in Czechia, but across Europe. Horská argues that such spending can make economic sense, provided it is used effectively.
“It is certainly about efficiency and good management. We have calculated that the multiplier effect could be significant—if every crown spent on defense were used effectively, and particularly if it went into research and development, then we could boost economic growth in a non-inflationary way. At the same time, we would be increasing the economy’s capacity.”
In her view, defense spending could even help transform the Czech economy.
“We could move towards what is often called the second economic transformation—from an assembly-based economy to a knowledge-based one. The potential is there. But of course, nothing is guaranteed if the spending is not directed efficiently towards areas that can generate this multiplier effect—such as research, development, education, and innovation—rather than just into secondary defense expenditures.”
At the same time, she acknowledges that part of defense spending is, in effect, consumption—but with an important societal return.
“At the same time, we also see the need for standard defense spending. That is, in a way, consumption—but consumption that returns to us in the form of a sense of security and stability. And that matters, because households will not start to panic.”
Borrowing for investment, not consumption
With the budget deficit already high, the question remains whether governments should be willing to borrow even more to finance defense. For Horská, the answer depends on how the money is used.
“That is exactly the point. If the increase in the deficit were in favor of investment—which this year’s budget is not—then I would not have a fundamental economic problem with it.”
“Borrowing for investment is very different from borrowing for consumption. And I consider defense spending to be an investment, one that has long-term effects—not only on the economy, but also on security and on people’s confidence, their willingness to do business and develop economic activity.”
“Because if you live in a country where you do not feel safe, you will not develop business there.”
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