The term of the former Czech government saw a gradual recovery from protracted economic crisis and a remarkable growth of GDP. The overwhelming part of the effect, however, was not attributable to the government’s activities, but to the several years of devaluation of Czech koruna (CZK) and to exaggerated austerity measures of the previous ring-centre government. The space created by such an “economic trampoline” was in fact not used by the government for pro-growth measures, e.g. investment support of new technologies, science and education, but more or less spent in partial and easy-to-present expenses in the social and employee sphere. No palpable progress could be recorded in the inevitable and overdue social security and health service reforms.
Not all above short-term measures of the former government deserve serious criticism. The improved financial support of families with young children and rise in teachers’ or policemen’s wages were a desired partial compensation of a long-term structural inequity. Less praiseworthy, however, was the general substantial rise in the salaries of state officials that, jointly with a continuous growth in their number, created another contribution to the already imminent degree of mandatory budget expense.
The growing economy and a better collection of taxes facilitated even reaching a surplus in the state budget of 2016, and it seems that the deficit of that of 2017 will also be very moderate. But the success in the other areas of public administration was by far smaller. No special progress was reached in the simplification of the very complex tax system with extremely high taxation of labour, or in the IT communication with authorities. In fact, a rare success in the sphere of public administration was the (still disputed) introduction of the electronic registration of sales (elektronická evidence tržeb, EET) addressing tax evasions at the level of small businesses.
Partial improvements in the social sector (e.g. the raised compulsory minimum wage) were made at the expense of entrepreneurs whose regulatory burden was not reduced and, with the EET in mind, just developed to the opposite. A maze of legislative regulations governing the enterprise sector persists as well.
Another problem is that the system of education also remains without significant changes feeding a stable discrepancy between school-leavers’ qualifications and real employment needs in the labour market, especially with missing technical professions. With some exceptions, generally unsatisfactory level of university education is obvious in particular if compared internationally.
In spite of some achievements like the government’s approval of improved Transport Sector Strategies (Dopravní sektorové strategie) or of the programme of introducing high speed rail, the preparation and construction of transport infrastructure gets into motion only very clumsily, which makes the network lagging behind not even the “old” EU, but also behind some central European countries. Delayed drawing of allotted European funds for the 2007 – 2013 programming period led to a rush in 2015 with spending the remaining funds in projects of lower level; and it seems that, in the recent programming period, the process begins to follow the same path.
All in all, the new cabinet, after its uneasy formation, has been left much to improve. It has to prepare a necessary simplification of the tax and company founding legislation and also deal with changing the social security system into a sustainable mechanism, and thus evade relative impoverishment of pensioners. The education system should help to produce missing specialists. Problems of labour market can be mitigated by some imports of cheap labour force from abroad in the short run; but in the long run the main impulse is to be created by automation (4.0 industries) and development of the sector of services. Czechia as a “European mounting and storage shop” is to transform into the position of a supplier of high-value-added products and services. Inevitable in this respect are a profound reform of the educational system and efficient support of science and research. The continuing swelling of state administration is to be put to an end, and further deterioration of its quality stopped by instigating competent specialists from private sphere to enter.
Speeding up of planning and construction of transport infrastructure is vital to prevent further stagnation of its quality. First and foremost, it is necessary to begin with introducing legislation supporting strategic infrastructure projects and giving due preference to national investment priorities.
A more active policy towards EU is no less needed, so as to enhance cooperation on tackling its critical problems and ensuring that the Czech voice is clearly heard. A long-lasting problem to be solved is underproportional participation of Czech specialists in European structures. The theme of disputed Czech accession to euro is not simply a question of public contribution to European stability mechanisms or of potentially induced inflation but also of the discussed trend of creation of a “hard core” of EU countries, naturally united on the basis of the single currency. The Czech economy still has the chance to belong to this core with similar position like its key trade partner, Germany.
With all this in mind, it is necessary to frankly wish the new government much necessary energy and all the good luck.
By Emanuel Šíp
Partner
Allied Progress Consultants Association