The government faces a new test: pushing through public finance reform

22-07-2003

Regardless of the final outcome July will be remembered as a month in which the government once again put its political future on the line. After a turbulent year that saw the fragile coalition weather discord over a proposed tax hike, and further disunity during presidential elections, the government has now rested its future on the passing of its public finance reforms, a process that begins today expected to culminate in September. This time: have coalition members agreed to agree? Or will the government fail from within, eventually facing embarrassing defeat?

Prime Minister Vladmir Spidla has risked his career before, but never with as much at stake as proposed public finance reforms, needed regardless whether one thinks the government has gone too far or not nearly far enough. Unable to rely on support from either the opposition Civic Democrats or the Communist Party, the coalition will have to hold together for its package to pass, and Mr Spidla has staked his name on it, threatening to resign if things go any other way. Not surprisingly so far, Mr Spidla has been assured by coalition partners they will support the package. Christian Democrat Jan Kasal:

"The Christian Democrats are part of the coalition government, a coalition government that has a duty this year for kicking-off public finance reforms. There is no other alternative. We will all vote in favour of the package in the first reading."

Communist deputy Vaclav Exner, whose party is against the proposal, agrees there is little risk:

"If the coalition retains discipline the package will pass."

A first reading, yes, but expect some cracks in unity to begin to show as the package is debated further. There are indications that as many as ten deputies among Mr Spidla's Social Democrats are at odds with the proposal, which includes legislation outlining cuts to social and heath payments, raising the VAT and raising taxes for sole entrepreneurs, as well as freezing wages in the state sector, and laying-off as many as 30,000 state employees. Second and third readings in parliament will see changes hotly debated, and it is there that analysts see the greatest possibility for inner-coalition strife. Freedom Union member and coalition deputy Hana Marvanova, for example, is a wild card: unafraid to vote against the government a year ago, she has already indicated her unease over the proposal's raising the VAT on services to 22 percent.

At this point it is clear that it could be a long and dreary summer for the government as it begins to press ahead with its reforms, an unenviable position. But then, this government hasn't had it easy since day one. Its proposal hit from both the political left and right, all eyes will be on parliament over the next weeks to see just what kind of reforms will be hammered out. The only certainty at the moment, even more criticism will be forthcoming: Vladimir Tajzler, representative for sole entrepreneurs:

"The reforms will lead to the end of small entrepreneurs, no longer able to support themselves, so the state will get nothing for the state budget. On the contrary, these businessmen will then file claims for various forms of unemployment and social support, making the reforms ineffective with a capital 'I'".

22-07-2003