Budget debate to continue but future of reforms remains uncertain

25-11-2003

The lower house of the Czech Parliament on Tuesday started a session to debate the details of the state budget for 2004. Although the overall framework has been set, the legislators will now be able to move money between individual chapters. Yet the future of the bill is uncertain as it hinges on the approval of a package of fiscal reforms.

Every year, the budget debate is the most closely watched event in the Chamber of Deputies. In the Czech Republic's ten-year history, the lower house failed to approve budget before the end of the year on two occasions, and the country was forced to run on a provisional budget.

The second and third readings of the 2004 state budget are some of the key items on the lower house's agenda for the next couple of days. The budget framework - with total expenditures of a record 869 billion on 115 billion lower revenues - has been fixed. In the second reading, though, the MPs will be subject to various pressures and lobbying to move money around, especially in the subsidies chapter.

Several MPs have already said they will press for changes, yet the deputy chairman of the parliamentary budget committee Michal Kraus from the ruling Social Democratic Party remains optimistic:

"I believe there is nothing that could significantly affect the structure of the budget and change it. I am confident the budget will pass the second and third readings in the original version, possibly with some cosmetic changes."

Indeed, minor changes within the budget should not be a concern for the ruling coalition. What they should be concerned about is the president's pending signature of a package of 11 fiscal reform bills. The state budget presupposes the implementation of the reforms, including tax hikes and sweeping expenditure cuts in the public sector.

Earlier this week, Mr. Klaus signed six of the 11 reform bills he received after they had been approved in parliament but he has been tight-lipped on what he intended to do with the remaining five.

Mr. Klaus, a conservative, has often been at odds with the centre-left government over the shape of public finance reforms which all agree are absolutely necessary.

Several of his advisers have reportedly recommended that he consider vetoing at least one of the fiscal reform bills - the social welfare bill - for its discriminatory nature.

To override the president's veto, the fractious three-party governing coalition would have to ensure all of its 101 MPs in the 200-seat lower house vote in favour of such a law.

25-11-2003