The Czech government on Wednesday won a vote of confidence in the lower house of Parliament which approved its tax legislation. In an unexpected turn of events, the senior coalition party, the Civic Democrats, found a solution to an inner-party conflict which threatened to topple the government: three Civic Democrat deputies who were opposed to the government’s tax bills resigned as MPs, allowing the government to continue.
The ruling parties have secured support for a package of controversial tax hikes that threatened to bring down the centre-right government. The six rebel Civic Democrat MPs who were holding out against the bill all bowed to pressure from the newly elected Civic Democrat leadership on Tuesday as the crucial vote, tied to a vote of confidence, neared. MPs Petr Tluchoř, Marek Šnajdr and Ivan Fuksa have said they will give up their seats in the lower house on Wednesday morning to enable the bill to pass. Two other MPs have promised to support the bill despite their strong reservations to it and the last of the six has said he will leave the assembly hall during the vote. The package of controversial tax hikes is a key component of the government’s austerity measures for 2013 aimed at bringing the deficit in public spending below 3 percent of the GDP. It is directly linked to next year’s state budget which will also be debated in the lower house on Wednesday.
Finance Minister Mirsolav Kalousek stirred the political waters considerably on Monday in presenting his revised draft state budget for 2013. The bill shocked many within both the government and the opposition by proposing billion crown cuts in high priority areas such as infrastructure and education.
In related news, The Czech Academy of Science has criticised the new 2013
budget proposal submitted by the Finance Ministry. According to the
budget bill, research and science spending will be cut by 2.7 billion
crowns in 2013 and by 2.5 billion in 2014 and 2015. The Academy of
will also see its budget lowered by 6.5 percent. The Education Ministry,
comparison, will receive half-a-billion crowns less. This includes funds
originally earmarked for teacher salary hikes.
Additionally, under the 2013 revised budget bill, the Interior Ministry is to save an additional 1.1 million crowns mostly in operation costs, spending on construction and national programmes controlled by the Transport Ministry is to decrease by1.5 billion crowns, and the State Transport Infrastructure Fund is to receive 5 billion less in subsidies. The financial and customs general directorates will get nearly half a billion less in 2013; the Culture Ministry will get about 300 million crowns less for reconstruction of cultural heritage sites and cuts in the Environment Ministry budget will amount to 200 million crowns.
The Finance Ministry has put forward a new draft of the 2013 state budget, being discussed by the cabinet on Monday, accounting for a drop in revenues and cuts in spending next year by 41 billion crowns. The budget deficit is to remain at 100 billion crowns, the same as in the previous draft. The cuts proposed are to affect science and research, transport infrastructure, teachers’ salaries and programmes co-financed by EU funds. The government must submit the draft budget to the Chamber of Deputies by November 23. The revised version of the budget bill, the ministry revealed, is taking into account current economic forecasts as well as the failure by the government so far to push through a tax package raising both VAT rates by 1 percentage point. The government has tied a vote on the bill this Wednesday to a vote of confidence.
Retail sales in the country slid by 3.3 percent in September year-on-year, while in August they declined by 0.8 percent, the Czech Statistical Office has revealed. Consumers saved primarily on food, home items, medicine and cosmetics products the bureau reported. By contrast, spending was not curbed in the areas of clothing and footwear. Several surveys have suggested a drop in consumer spending related to fears over the economy and the government’s austerity measures including VAT hikes.
A neogothic palace in the northern city of Ústí nad Labem, which has been used as a chemical laboratory for the past 50 years, is up for sale. The palace’s current owner, the biggest Czech oil refinery Unipetrol, has announced the sale of Ústí nad Labem’s most valuable building from the 19th century. Unipetrol had to lower the selling price this week, after the building has been on the market for about a year.
Members of the Czech cabinet will be discussing a new proposal for the
2013 budget on Monday. Despite the expected decline in tax revenue, the
proposal will be based on a 100 billion crown deficit. Finance Minister
Miroslav Kalousek had said earlier that the main cuts will be in
transportation, science and research, as well as co-financing of EU
projects. Mr Kalousek is preparing an alternative budget proposal given
possibility that VAT rates will not be raised and also considering the
estimated slower growth of the economy. The lower house returned the
original budget proposal to the cabinet for reworking because of
disagreements within the coalition over the tax reform package. The
government has to present the new budget proposal by November 23.
Rebel Civic Democratic MPs who have been refusing to support the tax reform package will continue talks with the government over the reforms, said one of the rebels Ivan Fuksa, although they are unlikely to change their stance. The lower house will renew deliberations on the reform package on Tuesday
In an interview in Saturday’s Lidové noviny newspaper, Head of ING’s Czech Pension Fund unit Jiří Rusnok said that he considers investing in the proposed second pillar of the pension reform to be risk both ofr pension funds and customers. Mr Rusnok, who was one of the main advocates of the reform, expressed his dissapointment at the lack of political consensus. ING announced on Thursday that the fund is not planning on introducing financial products that would comply with the embattled pension reform. One of the main reasons, that the former Finance Minister Rusnok cited in the Saturday interview, is that given the opposition’s pledge to repeal the reform once the Social Democrats win the next parliamentary election, the new type of funds will cease to exist in two to three years time.
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