Social partner opinions on the draft state budget for 2011

In September 2010, the two biggest Czech social partners, the Czech-Moravian Confederation of Trade Unions and the Confederation of Industry of the Czech Republic, published their opinions on the 2011 draft state budget. Both organisations have reservations about it. They differ on some points, but they agree, for example, that spending cuts have not been linked to economic development, and that there is no independent audit of ‘wasteful’ spending by individual ministries.

Outline of budget cuts

The Czech Minister of Finance, Miroslav Kalousek of the coalition party TOP09, is planning radical cuts in public expenditure. The draft public budget for 2011 envisages a deficit of around CZK 135 billion (about €5.5 billion as at 4 November 2010), amounting to a projected 4.6% of Czech gross domestic product (GDP). Most of the suggested cuts are in:

  • public administration (employees here face a 10% wage reduction);
  • transportation and transport infrastructure;
  • social benefits, including changes to those for unemployment, maternity, parental allowance, and the one-off benefit paid on a baby’s birth.

Points of agreement among social partners

The Czech-Moravian Confederation of Trade Unions (ČMKOS) and the Confederation of Industry of the Czech Republic (SP ČR), both published reactions to the draft budget on their websites, expressing a number of reservations. The two organisations agree that the draft focuses entirely on cutting expenditure, without linking these measures to economic policy and development. Both SP ČR and the ČMKOS criticised the lack of an independent audit of ‘wasteful’ spending by individual ministries. ČMKOS also criticised the poorly thought-out Regulatory Impact Assessment (RIA), as well as a lack of any research that would evaluate the impact of austerity measures on employment, individual households and people in danger of social exclusion.

Industry criticism

However, SP ČR disagrees with postponing the cuts in sickness insurance payments to 1 January 2011 from 2.3% to 1.4%. It also criticises the proposal to extend the employers’ obligation to pay sickness benefits from two weeks to three (which will cover the employee’s third week of illness), before the state starts to pay. The postponement in the reform of sickness insurance is projected to save the government CZK 12.9 million (€0.5 million). However, SP ČR believes that the losses for employers will be much higher at an estimated CZK 16.3 million (€0.65 million). Also, SP ČR believes these measures will result only in greater vigilance of companies when creating new recruitment opportunities, which undermines job creation in times of high unemployment. SP ČR also disagrees with the proposed increase in expenses for basic research by the Academy of Sciences of the Czech Republic (AV ČR) while cutting the budget for applied science and research supported by the Ministry of Industry and Trade of the Czech Republic (MPO). SP ČR says money is needed here to enable a relatively rapid take-up of research findings in manufacturing processes.

Union criticism

The trade unions focused their criticism on the impacts of the proposed cuts on employees and citizens in danger of social exclusion, particularly on the reduction of social benefits and wages for employees in public administration (CZ1009019I). The unions also attacked the government’s preoccupation with making savings through cuts in spending, suggesting that it should also raise taxes.

Commentary

Both organisations agree that ill-considered cuts in spending (on transport, social benefits) may endanger economic competitiveness of the Czech Republic, and hamper employment and economic growth in the future.

Soňa Veverková, Research Institute for Labour and Social Affairs (RILSA)

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