Prague - Public spending cuts are a hot issue all over the EU lately. In 14 days, the Czech government will decide on public spending cuts for the following years.
Finance Minister Miroslav Kalousek says that further EUR 820mil will have to be cut next year, and has offered three ways of how to do it.
One variant would make all ministries cut five percent of their expenses, which would save EUR 740mil. Another proposal suggests they cut 10 percent, saving EUR 1.3bil, but the government would spend EUR 575mil on new highways. The third variant would consist of "drastic social sector cuts," said Kalousek.
Read more: Greek default would be "no problem" for Czech banks
Read more: Let them default: Slovakian PM on eurozone debt crisis
On Wednesday, Czech economy ministers were considering the first two variants. This means that each ministry will have to cut 5 or 10 percent of those expenses they are not obliged by law to have. It will be up to respective ministers to decide where to cut.
In addition, Kalousek said that the ministries should also prepare for cuts in the two years after that. The minister wants to save EUR 2.26bil in 2013 and 3.7bil in 2014.
In July, the economy ministers will decide whether they will also increase subventions for the Transport Ministry in order to allow it to build new highways and repairing the existing ones. However, these projects could be financed only if other ministries manage to curb their spending enough.
Social cuts still an option
"One of the coalition parties (Public Affairs) stresses its social concern, so the ministry has produced a proposal based on scrapping projects or optimizing the spending on public services. The finance ministry is however not against a drastic decrease of social spending," Kalousek said.
It appears it is possible to cut EUR 3.7bil in social spending. For example, if the state stops valorizing pensions, it will get half of this sum. This way, Latvia, Lithuania, and Hungary have managed to save their public finances recently. The other half of the sum could be cut by abolishing welfare benefits for the unemployed, sick, and families.
Read more: Hot summer? Czech labor unions prepare further protests
