Prague - Recently, many developed countries, including USA, have been struggling to cut their large budget deficits.
In this respect, the Czech government's plans appear quite ambitious: the government has approved the first outline of the 2012 budget, with state expenses no bigger than CZK 1,154bil (EUR 48bil). This would mean nearly CZK 30bil (EUR 1.24bil) less in comparison with this year's planned expenses.
The Czech Finance Ministry plans the same pace of cost-cutting also for the years 2013 and 2014.
"I appreciate that all ministers have agreed to the proposal," said Finance Minister Miroslav Kalousek about the outcome of the government meeting.
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If the expenses limits for the next three years are met, the budget deficit - as a proportion of GDP - will gradually decrease. By 2013, it will already drop below the three percent limit set by the EU's so-called Maastricht criteria.
Finance Minister Kalousek said that this goal will not be reached unless the government implements active budgetary measures, which means that state expenses must shrink by CZK 30bil every year.
"If we don't do that, we will surpass the 2014 budget framework by nearly CZK 100bil (EUR 4.14bil)," Kalousek warned.
In May, Mr Kalousek will provide the ministers with his proposals on budget cuts in their ministries. So far, he said that all state expenses and revenues will get fundamentally transformed.
This year's deficit of 4.6 percent of GDP has been reached by cutting CZK 65bil (EUR 2.69 bil) in state expenses. This means that in the next three years, the pace of cost-cutting will slow down by more than 50 percent.
However, the future cuts may be even more painful, because they will deepen the already implemented austerity measures.
In addition, if the state fails to collect enough in taxes, it will have to cut its expenses even more. In the 1Q 2011, the state collected 10 percent less than expected. If this trend continues throughout 2011, the state will collect CZK 50bil less than planned, which would force further cutting of expenses.
Planned deficits
| Year | Expenses (CZK bil) |
Deficit (% of GDP) |
Necessary cuts (CZK bil) |
| 2011 | 1182,9 | 4,6 | - |
| 2012 | 1154,2 | 3,5 | 28,9 |
| 2013 | 1176,8 | 2,9 | 60 |
| 2014 | 1211,7 | 1,9 | 98,4 |
