Government planning major cuts as growth slows

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The Czech economy has been thriving on many fronts in recent times. However, with growth slowing the prime minister and minister of finance are planning major cuts next year that should impact all government departments.


The minister of finance, Alena Schillerová, and the prime minister, Andrej Babiš, both from the ANO party, have been readying the other members of the cabinet for stinging cuts in 2018.

A week ago Minister Schillerová said that the government was running out of money and suggested solutions: letting go 10 percent of state employees and increasing taxation on gambling and spirits. However, this is only the tip of the iceberg.

Lidové noviny reported this week that the two ANO politicians were planning cuts that would hit all ministries. Transport will be particularly hard hit, receiving CZK 14 billion less than it has done this year. The Ministry of Agriculture will be CZK 6 billion worse off.

Ms. Schillerová says she first raised the budget for 2020 in January, saying it was fair to launch a discussion a year in advance.

But suggested this may have been a response to a decline in VAT revenues last month; they were 2.8 percent lower than in January 2018. Taking in more VAT has been a central plank of ANO policy.

However, the minister is not countenancing any changes in plans for this year’s budget, insisting that she does not wish to exceed the set deficit of CZK 40 billion. She said the economy was slowing, but only to the long-term average for the country.

However, the chairwoman of the National Budget Council, Eva Zamrazilová, told that projected growth of 2.5 percent for 2019 may be merely theoretical. She points out that the Czech economy is closely tied to that of Germany, which is experiencing a slowdown itself.

ANO’s government partners the Social Democrats have not responded positively to initial cost-saving proposals, with the latter’s leader, Jan Hamáček, saying the party rejected blanket layoffs of state workers.

His party colleague, labour and social affairs chief Jana Maláčová, has questioned the savings such a move would make, arguing that state sector redundancies were costly and complicated.

Ms. Maláčová has also rejected spending cuts that could impact the worst-off members of society.

What’s more, the Social Democrats argue that the government must look at boosting revenues through increased taxation, not just slashing budgets.

Meanwhile, ANO’s minister of regional development, Klára Dostálová, insisted that cuts would mean reduced investments. She said hers was an “investment government” and needed to invest for the future.

Auteur: Český rozhlas Radio Praha
Ajoutée: 08.02.2019

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