Several economists slam government’s decision to raise pensions as irresponsible ploy ahead of elections

The government has agreed to raise pensions next year, on average by CZK 750 a month. Since the decision became public on Thursday, several economists have reacted by saying that this is not the right time to increase the state’s budgetary commitments. Some have even accused the government of raising pension to attract more voters ahead of the October elections.

Finance Minister Alena Schillerová told Czech Radio that pensioners are a priority for the government and that the extra money has become available thanks to cuts in several other segments of the annual budget. In total, the rise in pensions is set to cost between 7 billion to 11 billion crowns.

However, the decision has been met with astonishment by several of the country’s leading economists. Michal Skořepa, an economist at Česká Spořitelna, told news site Aktuálně.cz that proposing an increase to pensions in the current economic situation is an expression of “fiscal cynicism”.

“We have already known for several months that, both financially and psychologically, pensioners did not suffer more than the rest of the population. We also know that, although the Czech national debt is still relatively low when compared internationally, Czech public finances have been adjusted in an unsustainable way and that this has gotten worse over the past year."

Labour and Social Affairs Minister Jana Maláčová tweeted that the extra money to cover the rise in pensions will come from the planned digital tax on big tech. However, that tax has been estimated to bring in just CZK 2.5 billion crowns this year, according to government estimates.

Trinity Bank economist Lukáš Kovanda tweeted that such a tax would not be sufficent to cover even a third of the pensions rise. He also highlighted that the digital tax is still in the stage of a proposal, despite the government having added the estimated income into this year’s budget.

The head of the Labour Ministry’s Fair Pensions Commission, Danuše Nerudová, told Aktuálně.cz that she is also concerned about where the government will find the money to fund the pensions rise.

“Without a clear vision of where to raise the money, this is just another irresponsible way of increasing the national debt which breaks the principle of inter-generational solidarity.”

Meanwhile, the chief economist of Raiffeisenbank, Helena Horská, told Aktualne.cz that increasing pensions is a luxury that could only be afforded if there were savings, for example in the state’s operating expenses, to draw from.

She also echoed several of her colleagues in saying that the timing of the announcement supports speculation that this is a move aimed at securing more voters for the ruling coalition ahead of the upcoming elections into the Chamber of Deputies, planned to take place this October.