Economists: Government plan to loosen fiscal rules threatens public finances
The opposition Civic Democrats said this week that they were prepared to take a Czech government plan to loosen rules on fiscal responsibility to the Constitutional Court. For their part, the coalition say they will overturn a presidential veto of the relevant bill in the coming weeks. Meanwhile, 20 economists have called on the government to drop the whole idea. One of them, Daniel Münich, explained the reasons for this appeal.
“There are a couple of reasons. One is that it is extraordinarily important issue – simply cancelling, or more or less cancelling, important rules that limit the government and future governments in using public money.
“The second reason is that it’s holiday season, and the new law seems to be moving through Parliament very easily, without major attention from people.”
One thing you are against is the possibility of increasing expenditure by 10 percent on the basis of a decision by the State Security Council. But in these uncertain times, wouldn’t an extraordinary security situation justify the change the government is pushing for?
“The Security Council is nothing other than part of the government, so in other words this would just be cutting out Parliament.
“And it can’t be that way. The government should always go to the lower house and ask for changes in the original budget, which can be done very quickly.
“So this is just a way of getting rid of Parliament.”
The minister of finance, Alena Schillerová, says the government have no alternative to loosening these rules, which she calls a severe constraint on the Czech economy.
“Of course that’s not true.
“There is a very clear, very simple alternative. And that is to increase taxation on incomes. In 2021 there was a huge decrease that was originally planned to be temporary, but it has remained there until now.
“The tax cut at that time in current prices was CZK 130 billion, which is quite a lot of money, and more than the government needs now to finance all its promises and obligations.”
Some people may say that if this bill is passed and if the government then acts in an irresponsible manner, voters can punish the government – they can vote the government out or not vote for those parties again.
“This government will be there until 2029, but fiscal problems, the payment of debt, will show up later on.
“So the only case in which this government would be held to account by the public would be if some kind of external crisis occurred that would require much higher spending, which would impose an additional burden on the public finances.”
In any case, the government are planning to override the president’s veto. The opposition say they will take the matter to the Constitutional Court. How do you think this will end?
“We’ve never had such a case in this country, so it’s very difficult to say.
“But my feeling is that the Constitutional Court will probably – though I’m a layman in this – say that Parliament sets the rules, so if this is approved by Parliament, by a majority in both chambers, they will have no additional say on this.
“But we’ll see.”
