Ruling coalition wins crucial first round in battle over public finance reforms
The centre-left government have won their first major victory in the battle over planned public finance reforms. The lower house voted on Tuesday to overrule President Vaclav Klaus's veto of a bill which would substantially increase VAT. The most important change is that all services currently charged under the lower rate - 5 percent - will be moved to the upper rate - 22 percent - as of January 1st, 2004.
"The reason there's been so much fuss about this new law is that although the EU requires that these services are raised to the upper rate of 22 percent, it only has to be as of May 1st 2004 when the Czech Republic joins the EU. So the Czech government hasn't made itself very many friends by deciding to make the move four months in advance and thus making an extra 13 billion crowns for the Czech treasury."
The lower house's decision to overrule President Klaus's veto of this bill is being hailed as a major victory in today's papers. Why is that?
"This government's future rests on its reform package for public finances. In order to fund some of the extra revenues to make that fiscal reform package work, what the government really needed to do was to have this bill passed. So it's part of the reforms, it's the first step in getting everything through parliament, and remember that the prime minister and the finance minister have both staked their political futures on the success of the reforms. I'm not sure if it could be called a major victory, but it's definitely a win for the government."
"Absolutely. There's been an awful lot of fuss about it, but it certainly seems that at this point anyway, almost all the coalition MPs are now on board and are willing to vote for the reforms. They seem to be aware that if they don't vote for the reforms, then the government will fall and they'll all be out of jobs sooner or later. And I think they'd rather stay in government and see if they can achieve something else once the reforms are done."
And I suppose this is also an important psychological boost for the ruling coalition ahead of Friday's vote of no-confidence.
"Yes, although I think the government has more to fear from rebel MPs upset about the reform package than from the vote of no-confidence. A lot of spending cuts on welfare, including sick pay, have upset a great deal of Social Democrat MPs, and some of them have indicated they may actually vote against some of the measures. So that's a much bigger threat at this point than the vote of no-confidence."
