Czech Prime Minister Petr Fiala has acknowledged that some state employees may lose their jobs due to the government’s proposed two percent reduction in public sector salaries. However, he also added that there are other options to achieve the goal, and it will depend on how individual ministries decide.
In an interview on Thursday evening, Fiala said that while some departments may resort to layoffs, others may not fill vacant positions, not hire people who retire or eliminate departments or unions. He also noted that reducing the volume of salaries in the public sector by CZK 9.7 billion, which equates to the two percent mentioned above, does not mean that state employees’ salaries will be cut across the board.
Fiala explained that he does not expect anyone’s salary to decrease, as the overall amount must be reduced. He added that every state organization doesn’t need to reduce by two percent, but the target must be met. At a press conference on Thursday, the government presented an austerity package alongside a proposed pension reform. The government aims to eliminate 22 tax exemptions as part of its efforts to save money and improve public finances.
Instead of three VAT rates, there would only be two: a reduced rate of 12% and a standard rate of 21%. However, some taxes, such as the property tax, taxes on employees and companies, and taxes on tobacco, alcohol, and gambling, would be increased. The package includes 58 measures that are expected to positively impact the state budget deficit of nearly CZK 148 billion in the next two years.
The government plans to reduce state spending by CZK 78.3 billion over the next two years, with CZK 62.4 billion in 2024 and CZK 15.9 billion in 2025. Fiala stated earlier that if the government did not take these measures, the budget deficit would be CZK 94 billion higher next year and CZK 150 billion higher in 2025.
Fiala emphasized the urgent need to brake the rate of indebtedness, which he claimed was a legacy of previous populist-socialist governments. He believes that if the government does not act now, the situation will spiral out of control, and the responsible and sensible thing to do is to take action.