5 conditions of ČSSD regarding the adoption of the fiscal constitution

2013-02-19 Continuation of the European integration is for ČSSD a superior aim. Signing fiscal pact and approval of fiscal constitutions we consider essential. These two things can´t be separated so the consent of ČSSD upon acceptance of the government´s draft of fiscal constitution is subject to the following steps:

1.The signing of the EU fiscal pact, as an expression of commitment of the Czech Republic to continue the European integration

2.European legislation must be fully reflected in the fiscal pact. We don’t want only some efforts to produce indicators that are not compatible with the EU standards.

 

3.We want to come clean. The right wing government produces hidden debts, especially in the use of European Structural Funds.  The government must clearly disclose how much debt is left to the next government.  If the government fails to do so, we must assume a catastrophic scenario that is estimating a hidden deficit in the range of 150-250 billions of CZK, or about 4-7% of GDP.

 

4.Presentation of the Implementing Act for Fiscal Constitution

 

5.We require moving the threshold of the “debt break” range from 40 to 50% of GDP to 45-55% of GDP. If only because of the fact that under the rule of the right-wing governments, public debt rose from 28,28% in 2006 to about 45% at the end of 2012.

 

Assuming that the above conditions are met, there is a real chance that the fiscal constitution will be approved during the current term. Fiscal pact and fiscal constitution are in our opinion connected and one can´t replace another. The pact is not just to set a debt break or to set public finance deficits.  The fiscal pact is mainly about coordination of economic policies of the countries that are using the Euro currency. Euro-zone needs not only a common monetary policy, but also a common fiscal policy and a common economic policy in general. The fiscal pact is a next step on the way to a common fiscal and economic policy the Euro area desperately needs for its survival. On the other hand, for those countries that do not use the Euro as their official currency, the fiscal pact should mean the support the efforts of the eurozone´s deeper integration and their commitment to this deeper integration when adopting the euro currency. Immediate impact on countries that do not use euro currency after the signing of the pact is minimal.

 

The Czech Republic should leave the two element set of EU countries (consisting of the Czech Republic and the United Kingdom) that have not signed the pact. The United Kingdom is a country with huge financial sector and as a former colonial power, can afford to mess with the EU membership. Czech Republic, however, is a country dependent on manufacturing industry and therefore can´t afford such gamble. It is in our best interest to sing the pact even though we may have reservations to certain provisions. For instance, the commitment of the structural public deficit below 0,5 % of GDP can be in time of economic crisis too binding and damaging attempts to promote economic recovery. Besides many countries that have signed the fiscal pact fail and will not be able to perform the condition of this indicator.

 

Jan Mládek, ČSSD Shadow Minister of Finance

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Ing. Jan Mládek CSc.
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