Ex-communist Europe
Austerity in the Czech Republic
The Czechs prepare to be squeezed
Sep 3rd 2010, 16:24 by The Economist | PRAGUE
DURING his recent visit to Prague, Valdis Zatlers, the president of Latvia, was keen to persuade me that the situation in his country was improving. I asked him if he had any advice for the Czech government, as it pushes through austerity measures harsh by local standards but nothing compared to the Latvian experience. "Public communication," was his reply. "Try to explain people what it is necessary to do, and why."
Petr Nečas's centre-right Czech government could do with some good PR, as it goes into a round of discussions over the austerity measures. Public-sector trade unions, covering the fire service, soldiers, policemen and teachers, are planning demonstrations for September 21st. Unlike their Polish counterparts, Czech unions are not renowned for their militancy, and Czech politicians prefer quiet negotiations to public rows. But three months after parliamentary elections, the country is once again in pre-election mode—October will see local and Senate votes. We can therefore expect a lively autumn.
A proposed labour reform is also proving controversial. "If there is a strike, so be it,“ was Mr Nečas's surprising comment on a new, radically pro-business version of the reform prepared by the conservative TOP09 party, which governs in coalition with Mr Nečas's Civic Democrats (and the Public Affairs party, the new kid in town). In October's elections, both parties will struggle for influence in Prague, where the local contest will be particularly important. Following a series of scandals the Civic Democrats face defeat in Prague, for the first time since 1989, at the hands of TOP09. Within the Czech Republic's coalition TOP09 and the Civic Democrats clash regularly over who should take responsibility for which cuts and how deep into the flesh of state administration the cuts should go.
And on the public-sector cuts, an anecdote. Everybody can imagine a stripped-down police force or fire brigade, but earlier this week, at a reception at the ministry of foreign affairs—which is firing about 10% of its staff—ambassadors fearful for their future were almost in tears. The country will lose diplomatic muscle, they said. "Welcome to the real world", I replied. I didn't mention the poor Latvians, whose public-sector salaries have seen real falls of 20-30%. Capitalism in the Czech Republic since 1989 has had soft edges.
Eastern approaches deals with the economic, political, security and cultural aspects of the eastern half of the European continent. It incorporates the long-running "Europe.view" weekly column. The blog is named after the wartime memoirs of the British soldier Sir Fitzroy Maclean.
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The government aims to do only simple (flat) cuts in the budget for next year (resulting in state employees salary cuts). The true reforms of the budget structure are promised for 2012.
People will accept cuts only if they see a significant improvement of the state administration efficiency because the problem of the country does not lie in high salaries (their growth was lower than productivity growth in last decade) but overpriced and/or unnecessary and / or inefficient public purchases. And as this issue winds throughout all levels of the state and communal administrations, it represents a significant problem. Therefore the main trouble of Czech economy is called incompetent or corrupted politicians. Let’s hope that current politicians (in particular from the Public Affairs that is not connected with the past economic mafia octopus) will be at least little bit better.
But, to be fair, part of the problem is also in the general public – in particular lack of low-level public life involvement willingness. For example, current spending cuts in the UK result in restraint of state-run public services – e.g. local public libraries. But people in local communities are ready to take over the services and run them on a voluntary basis. I’m afraid that in the Czech Republic (and most post-communist countries where people got used to rely on the state) would similar (local) government decision lead simply to ceasing the service and upset people who would grumble that “it was surely better during communism when these services were guaranteed”.