Is Prime Minister Paroubek's prognosis of prosperity realistic?


On Tuesday the Prime Minister Jiri Paroubek promised that the Czech standard of living would reach the average of the EU 25 in just seven years. He attributes this to his government's policies, with attractive investment incentives, an improving transport infrastructure, and efficient use of the EU's structural and cohesion funds. Statistics show growth rates that most of the old EU members could only dream of, but is Mr Paroubek's prognosis realistic?

Marketa Sichtarova
Dita Asiedu spoke to economist Marketa Sichtarova:

"Well, I have to say that I partly agree. If we were to compare the Czech Republic to the whole European Union [EU 25 and new states], then it can be possible to be in the average within six, seven, or eight years. But we should rather compare the situation in the Czech Republic with the 'old' EU or European euro-zone. We forecast that the Czech Republic will reach the average within 25 or 30 years."

That's a rather grim prognosis.

"Well, the problem is that the rest of the European Union grows quite fast. While we had approximately five percent of growth in the Czech Republic in 2005 and will most probably experience the same growth this year, the average growth in the euro-zone is between one and two percent. So, we expect to cover the bigger gap between the Czech Republic and the euro-zone within ten years and fill the tiny remaining gap in twenty years."

I wouldn't say that Czechs are living such a bad life now. How would you compare their standard of living to the EU 25 today?

"It is very comparable to countries like Spain, for example, but cannot be compared to countries like Great Britain, Germany, or Luxembourg."

Why, for example?

"Because we cannot only consider attributes like cars and mobile phones, for example. We need to compare to things like the GDP per head and here there still is a very significant gap. For example, in Luxembourg the lowest guaranteed salary is close to 50,000 crowns (a little over 2,000 US dollars), which is difficult to reach in the Czech Republic within ten years."

That's more than twice the average wage in the Czech Republic.