Renowned economist Jan Svejnar discusses challenges facing Czech economy

24-09-2004

Jan Svejnar is one of the most respected economists the Czech Republic has produced. An adviser to former president Vaclav Havel for almost a decade, Mr Svejnar is a professor at the University of Michigan's business school and heads an American-style PhD programme and research centre at Prague's Charles University. I caught up with the renowned economist at a public debate in Prague this week, and first asked him what were the major challenges facing the Czech economy.

"I think that the big challenge is, of course, to get the economy in sufficient equilibrium to be able to join the euro. So the preparation for the entry into the euro is important. I think then connected with it is how to reduce the budget deficit and generally reduce the tax burden here, and I think for that the Czech Republic will have to carry out significant pension reform, significant health care reform.

"And I think also to look again at the labour market, to make sure that the labour market has the social safety net, which it needs to have, but at the same time be flexible so that people can really move to where they are most useful, to where their productivity is the highest; in the short run within the country, but in the long run all over Europe."

About the euro, we've heard different guesses as to when the Czechs may join the eurozone - when do you think you it's going to happen?

"I think that realistically it won't happen before 2010, maybe 2009. It could happen even later, if strong voices against joining the eurozone become louder. But I personally think that as soon as the Czech Republic gets its house in order, as soon as the budget deficit is reduced and the reforms are carried out, it should join the euro as fast as possible."

You were saying earlier that the Czech Republic and the other new states in the EU need to take advantage of membership - how should the Czechs do that?

"Well, there are various ways. One of course is to benefit from foreign direct investment. The other is to benefit from the fact that they can sell their commodities in the European market.

"And concretely, in terms of now being members, to take advantage of the regional funds, the transfers that the Czech Republic qualifies for, but for which it has to show that it can use them productively, have the absorptive capacity -that's very important. Those are the areas where I think the Czech Republic has to step in and become a full-fledged partner."

You're a professor at the University of Michigan in the States - from your perspective is the Czech education system ready for the future?

"I think the Czech education system needs to continue in reforming itself. It's pretty good at the primary and secondary level, [though] further reforms are desirable there as well.

"I think it's at the university level, the college, the bachelor's degree and higher, where it really needs to reform itself, to become a competitive and high-quality system, and one that is able to provide education to a large part of the population of young people. Right now we're educating too few people at the college and university level."

Getting back to the EU in general - do you favour deeper integration?

"Yeah. I think that once the country is in the EU it should integrate itself as fast and as far as possible. That includes political integration, but again I don't think it should be at the expense of national sovereignty.

"It's quite OK to be deeply integrated. Individual states in the United States are a good example: they are very much integrated but yet at the local level of decision making takes place and the citizens of individual states decide a lot of things in all areas - executive, legislative, judicial."

24-09-2004