Social partners attack ‘unrealistic’ 2012 state budget

The Czech government approved the state budget for 2012 on 21 September 2011, even though trade unions and employers disagree with it. They say it is based on an unrealistic projection of the growth in the gross domestic product (GDP). Trade unions also criticise the fact that the budget’s revenue and expenditure proposals are based on laws not yet adopted by Parliament. Although the Czech Prime Minister agrees the projected growth rate may be too optimistic, he has so far refused to revise the budget.

Unrealistic GDP growth rate

The budget was drafted on the basis that the state would get revenues of CZK 1,084 billion (€43.4 billion as at 6 October 2011) and will spend CZK 1,189 billion (€47.6 billion). This would mean a planned deficit of CZK 105 billion (€4.2 billion) which is CZK 30 billion (€1.2 billion) less than the deficit approved for 2011.

However, the Confederation of Industry of the Czech Republic (SP ČR) says the idea of achieving this deficit is unrealistic because the growth of 2.5% in GDP predicted by the Ministry of Finance (MF ČR) is highly improbable – a view also shared by trade unions. SP ČR expects a maximum of 1% growth in the gross domestic product (GDP). Trade unions expect a slowdown in growth, and Prime Minister Petr Nečas admitted:

Today it is reasonable to assume that next year the economic growth will not be 2.5%. It is highly probable that we may have to revise next year’s growth, reducing it by one percentage point. In terms of next year’s revenues it means a deficit of 12 thousand million Czech crowns.

Social partners’ objections

The Czech-Moravian Confederation of Trade Unions (ČMKOS) has also criticised the fact that the laws underpinning the government’s expected revenue and expenditure have not yet been approved by Parliament. They are particularly concerned about the rise in VAT, from 10% to 14%, and about reforms to pensions and healthcare.

A spokesperson for ČMKOS said the budget set out only how the measures would affect public finance, and not the impact on households, employment or people near the poverty line – despite the fact that it will be workers and socially deprived groups who will be most affected by the measures if implemented. ČMKOS also say the budget fails to account for the reduction in civil service jobs, and the salary cuts for those civil servants who remain in work, which will affect quality of public services. Cutting the costs of active and passive employment policy, will primarily affect employees and low-income households.

SP ČR disagrees with cuts in funding for transport infrastructure while expenditure on state administration is increased. SP ČR says this is inconsistent with the government’s stated intention of saving public money and requires each department to prepare budgets in a transparent way and carry out an audit. SP ČR praised the extra money earmarked for science and research, and education, but said the way it is to be spent is haphazard and inefficient.

Despite the criticism by unions and employers, Prime Minister Nečas says the government is not planning any changes.

Sona Veverkova, Research Institute for Labour and Social Affairs

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