First shot in budget battle is fired

The fourth so-called government "crisis" has been over for nearly two weeks, and the ruling parties have been uncharacteristically silent since striking a deal to keep the tripartite coalition alive June 30.

But insiders say the next big fight is just around the corner as the governing coalition - comprised of the Civic Democrats (ODS), TOP 09 and Public Affairs (VV) parties - debates the 2012 budget proposal being drafted by Finance Minister Miroslav Kalousek (TOP 09). A draft proposal outlining a 2012 budget with a planned deficit of 105 billion Kč ($6.2 billion) is expected to be submitted in August. The deficit would be 3.5 percent of GDP, down from 4.2 percent in 2011.

"This is the next big one," said a parliamentary source with close ties to all three coalition parties. "The budget could be the one that makes [the government] fall."

Shortly after the parties signed off on the series of personnel and policy changes to the original coalition agreement that kept the government in power, VV deputy chairwoman and newly appointed Deputy Prime Minister for Anti-Corruption Karolína Peake said she, too, believed the budget debate would not be a particularly friendly one.

"There will be a hard fight over the state budget," she said. "There is only peace until the next war, and [the budget] is the next one coming up."

The major sticking points will likely be trying to secure agreement on the barrage of cuts on the table to combat the sharp drop in operating cash that some say could be down as much as 40 billion Kč compared with 2011.

"That is a massive amount of money, and the government will have to deal with it. Since they focus only on budget expenses, more cuts will have to be executed," said Milan Znoj, a political analyst and professor at Charles University. "This will certainly lead to a new government crisis, and it would not be only VV who will be bucking this time. ODS will also try to question the cuts."

VV has already begun criticizing the expected cuts, accusing Kalousek of planning to slash more funds for VV-controlled ministries, including education and transport.

The Finance Ministry recently released numbers showing that tax revenues for 2011 have been much lower than anticipated. VV had been angling for a 1 percent increase in the corporate tax, which they said would have pumped 7 billion Kč into state coffers. But the party ended up dropping that request during negotiations for the new coalition agreement after strong opposition from ODS and TOP 09.

Experts both inside and outside government circles anticipate the budget talks will not only be protracted and vicious, but could also end in a stalemate with only a provisional budget to show for what could be months of debate.

"The threat of a provisional budget is a real," Znoj said. "All government parties will take the discussion to the edge, and they will maintain the discussion until the very last moment. But maybe they may surprise us all and a rational discussion will take place."

Kalousek is expected to submit a draft 2012 budget bill to the government by the end of August. The bill is expected to reach the Chamber of Deputies by late-September.

- Filip Šenk contributed to this report.

Jack Buehrer can be reached at
jbuehrer@praguepost.com