Czech President Petr Pavel will not veto this year's state budget with a deficit of CZK 310 billion, even though some economists have warned of a possible violation of the Budget Responsibility Act. In an interview with news server Deník.cz, he said that the president should not tell the government how high a deficit to plan because the responsibility for budget policy lies primarily with the cabinet and parliament.
According to Pavel, a presidential veto would represent a political rather than a systemic step. As he said, the head of state is supposed to be a safeguard of constitutionality, not an actor in everyday economic disputes. At the same time, he admitted that the current rules of fiscal discipline are likely to be subject to change because, in his view, they do not correspond to the extraordinary economic conditions of recent years.
The draft budget has already been approved by the Chamber of Deputies of the Parliament of the Czech Republic in the first reading, when it agreed on its basic parameters. Deputies are now discussing individual chapters in committees without being able to change the total amount of revenue, expenditure or deficit. A final vote is expected once this stage of the legislative process is completed.
The biggest debate is whether the budget complies with the law on budgetary responsibility. The National Budget Council has pointed out that the structural deficit should be lower under the current rules. According to its calculations, the maximum deficit should be about a few tens of billions of crowns less than the government's proposal. Economists warn that long-term disregard of fiscal limits could undermine investor confidence and the stability of public finances.
On the contrary, the Ministry of Finance of the Czech Republic argues that the budget complies with the law due to the use of exemptions and a different interpretation of the methodology for calculating the structural balance. At the same time, the ministry stresses the need to finance social spending, infrastructure investment and support economic growth at a time of slow economic recovery.
The president's decision not to veto the process does not end the dispute, but rather moves it back to the political arena. The opposition criticises the growing state debt, while the ruling coalition argues that the gradual consolidation of public finances must be realistic and must not jeopardise economic stability.
Paul's attitude signals more institutional restraint. At the same time, however, he openly admits that without amendments to the fiscal rules, similar conflicts may recur in the future. The discussion on amending the Fiscal Responsibility Act may thus become one of the key economic issues in the coming months.
gnews.cz - GH
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