EU calculation: Czech 2009 budget gap at 270 bln CZK

Petr Holub
6. 1. 2010 9:42
The original estimate of the Czech finance ministry was only 192 bln CZK
Státní dluh. Ilustrační foto
Státní dluh. Ilustrační foto | Foto: Ondřej Besperát

Prague - Although the Czech 2009 budget deficit was estimated at 192 billion CZK (7.3 billion EUR) by deputy finance minister Bohdan Hejduk, by EU standards it is higher at least by 70 billion CZK.

Reserves, reserves…

The trick is that the ministry once again included the state reserves in the budget in order to make the gap appear smaller. However, according to the EU´s ESA95 guidelines, state reserves are not to be included in the budget revenue.

Jakub Haas of the finance ministry confirmed that reserves amounting to 45 billion CZK were included in the budget. "The more we lower the gap with the reserve funds, the less money the state can borrow," he said.

Municipalities and insurance companies

In addition, the ESA95 rules state that budget gaps of lower administrative units are to be included in government budget gaps. According to the October 2009 finance ministry´s estimate, in 2009 Czech municipalities had a budget gap of 15 billion CZK while the regions contributed with another 6 billion CZK.

Czech insurance companies estimate their gap up to 10 billion CZK, although at first, they expected to end 2009 with a surplus of 5 billion CZK. But they collected less money they originally expected.

As much as 7.5 percent of GDP

The finance ministry does not want to reveal any preliminary figures on the budget deficit counted according to the EU rules.

"The figure published in October 2009, which was 6.6 percent of GDP, is still valid. Possibly, we may update it at the end of January 2010," Haas told Aktuálně.cz. In this case, the gap would not overpass 240 billion CZK. However, if the deficits of the municipalities, regions and insurance companies are confirmed, the budget gap will amount to 270 billion CZK, which is 7.5 percent of Czech gross domestic product (GDP).

The state expenses increased by 80 billion CZK as rents raised by 10 percent in order to increase Czech purchasing power.
The state expenses increased by 80 billion CZK as rents raised by 10 percent in order to increase Czech purchasing power. | Foto: Reuters

According to the EU, the deficit must not exceed the 3 percent threshold of GDP for switching to the euro currency.

The 2009 budget gap is likely to set a new record, since the biggest Czech deficits, reached in 2002 and 2003 and counted in line with ESA95, were under seven percent of GDP.

While the budget gaps of 2002 and 2003 were caused by the government bailing-out of the toxic assets-owning Czech banks, the 2009 gap has caused by the economic crisis. In 2009, the state tax revenue was 90 billion CZK lower than in 2008 - corporations paid 44 billion CZK less in taxes and social insurance payments shrunk by 38 billion CZK.

At the same time, the state expenses increased by 80 billion CZK as rents raised by 10 percent in order to increase Czech purchasing power. This measure however cost 27 billion CZK of taxpayers´ money.

The government spent another 26 billion CZK to support Czech construction sector, above building highways. 
Compared to 2008, the state spent 17 billion CZK more on health care in 2009.

For 2010, the government does not expect to need to spend that much to counter the economic crisis. The expenses will grow by 30 billion CZK, the majority of which will be spent on building highways and improving health care. 


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