Early elections would take Czech Rep closer to Greece
6. 4. 2012 12:43
Fall of government would produce further deterioration of public finances due to frozen EU funding and low GDP growth
Prague - Before the 2010 general election, the three right-wing parties that now form the government promised to save the Czech Republic from the Greek scenario by solving the budget deficit and debt problems.
Now the three-party government is in a crisis, and early election is becoming a viable option, especially for the two major government parties, the Civic Democratic Party (ODS) and TOP 09.
However, the fall of the government would bring the Czech Republic further towards the feared Greek scenario.
This is because the government has failed to improve the public finances, in spite of various austerity measures it implemented. And its fall would produce a further fiscal deterioration.
The government budget, extrabudgetary funds, regions, municipalities, and health insurance companies lost CZK 160 billion in 2011. This figure is at least CZK 2 billion higher than in 2010, according to the Czech Statistical Office.
Frozen EU funding
The fall of budget revenues in 2011 was caused by decreasing tax revenues (CZK 40 billion) and the freeze on EU funding for the Czech Republic (another CZK 26 billion).
According to Regional Development Minister Kamil Jankovský, the Czech budget revenue will shrink by a total of CZK 32.6 billion due to the EU funding crisis.
The European Commission asks the Czech Republic to completely rebuild the offices charged with the task of controlling EU funding. If it fails to do so, the EC may permanently stop the funding for the Czech Republic in July 2012.
And if the government falls, the task of reorganizing the auditory mechanisms will probably not get done in time. And a permanent freeze on EU funding would deal another blow to the Czech public finances.
In addition, the GDP grew only 2 percent in the last two years, which was not sufficient to significantly improve the employment or household income situation. Today, the Czech Republic is among 12 European countries where the number of jobs is stagnating or decreasing. All of these countries have problems with their budget deficits.
This year, the Czech economy is expected to stagnate, with possible layoffs and further reduction of tax revenues.
autor: Petr Holub