Gov't passes 2012 budget

For all the hand-wringing over the so-called "next big fight" that was to be the debate over the 2012 state budget, Prime Minister Petr Nečas' government was decidedly united - at least publicly - in approving and presenting its agreed-upon draft version Sept. 20.

The draft, which must be submitted to Parliament for approval by Sept. 30, sets a deficit limit of 105 billion Kč ($5.8 billion) down 30 billion Kč from a 135 billion Kč planned gap for 2011.

"The government is fulfilling its goal of gradually reducing the deficit in public finances," Nečas told reporters during a televised news conference with his entire Cabinet in which they outlined the entire proposal.

Government officials say the draft, which was debated over three weeks starting Sept. 1, was the result negotiation and compromise among the three ruling coalition parties.

"Nečas emphasized from the very beginning that voting on the state budget can be compared with a confidence vote," said government spokesman Jan Osuch. "Cabinet members showed by their vote if they fully trust this government and whether they wish to remain in it.

"He stressed in front of the ministers that the Cabinet has to stand behind the budget as 'one man.' "

Behind the scenes, however, insiders say the relatively quiet negotiations were a function of political necessity for the ruling Civic Democrats (ODS) and their junior partners TOP 09 and Public Affairs (VV). The coalition has been plagued by one political scandal after another this year, and parties seem to agree on little more than their desire to remain in power.

A member of the Chamber of Deputies who declined to be named scoffed at the idea that there was any sense of unity between Cabinet members during the budget talks.

"I'm not surprised at all that they reached an agreement because it was the only thing they could do," said the deputy. "They all want to stay in power. The budget was never going to be a real fight. It was only a game."

Deputy Prime Minister Karolína Peake (VV) said the three coalition parties, all of which have seen their approval numbers plummet since the beginning of the year, knew what was at stake during the budget debates and were careful not to make their internal skirmishes public. But, she added, the negotiations were far from harmonious.

"Believe me, there was a lot of lively debate and a lot of arguing and a lot of anger," Peake told The Prague Post. "And there was plenty of rude and insulting talk, mostly in the case of [Finance Minister Miroslav] Kalousek."

As the chief author of the budget, Kalousek was especially tough on Transport Minister Pavel Dobeš (VV), sources said. Dobeš, who has been in his position for just three months, was forced to back down from his request of a 9 billion Kč increase for the State Transport Infrastructure Fund (SFDI), which is set aside for all road, bridge and other transportation projects. Dobeš threatened not to support Kalousek's proposal if his request was not met. He later settled for a 4 billion Kč increase.

"That was the biggest dispute, and the biggest concession on our part," Peake said. "The biggest argument for it was that without it we would probably have to return money [for infrastructure projects] to the EU."

Dobeš's office did not respond to repeated requests for comment.

The standoff ended, Peake said, when ODS and TOP 09 threatened to increase the unified value-added tax rate to 19 percent, which has long been a sticking point between the tripartite coalition.

"Eventually, Dobeš conceded, as bitter as it was," Peake said. "The victory is that we were able to get this approved without having to agree to the VAT increase. It's something the ODS and TOP 09 keep bringing up, and we keep resisting. It's something of a mantra with them, and they seem to be waiting for the moment they can make us do it."

The bill has met with criticism from outside the Cabinet as union leaders have derided the failure to adequately fund the SFDI, which would put thousands of construction workers on job sites throughout the country. Meanwhile, the opposition Social Democrats (ČSSD) have argued that the budget, which was based on projected 2.5 percent GDP growth for 2012, is based largely on "unrealistic" expectations for growth.

But Kalousek and Nečas have both stipulated that the draft bill is based on data available in July. Since Kalousek began preparing the bill, the International Monetary Fund lowered its growth forecast for the Czech Republic from 2.9 percent to 2.3 percent, with some experts anticipating even slower growth.

"The final extensity of the economic fluctuation and its impact cannot be reliably predicted at the moment," a Finance Ministry spokesman said. "But the Finance Ministry counts on many variations for which appropriate scenarios will be prepared."

- Klára Jiřičná contributed to this report.

Jack Buehrer can be reached at
jbuehrer@praguepost.com