July 31, 2019 / 10:57 AM / 25 days ago

Czech 2020 budget talks stall, Social Democrats want more funds

PRAGUE (Reuters) - Czech government talks on the 2020 budget hit a wall on Wednesday after the junior ruling party Social Democrats rejected current plans and said its ministries were around 20 billion crowns (715 million pounds) short of funds.

FILE PHOTO: Czech Republic's Prime Minister Andrej Babis arrives to take part in a European Union leaders summit, in Brussels, Belgium July 2, 2019. REUTERS/Piroschka Van De Wouw

The Finance Ministry, held by ANO party of Prime Minister Andrej Babis, faces tough negotiations in August and September to secure a final draft. It is expected to be the first plan since 2015 that will not deliver a surplus.

Budget talks are usually difficult, but the 2020 plan will be particularly hard for Babis’ minority government as it seeks to keep the central state deficit unchanged from 2019 at 40 billion crowns and also deals with other rows in the coalition.

Finance Minister Alena Schillerova said the Social Democrats were “torpedoing” the state budget by demanding more cash for their ministries.

Social Democrat leader Jan Hamacek told a news conference: “As the budget is proposed now, it is destructive, at least for our ministries, and we could not support it.”

The party said it wanted to increase budget income, partly by introducing a banking sector tax that Babis has rejected.

Babis said ministers should seek savings, CTK news agency reported.

The finance minister said it was “unacceptable” for ministers not to propose savings and to raise the deficit by 20 billion crowns when the economy was growing at just 2.5% a year.

The Czech Republic has been a model budget performer in the European Union, running surpluses thanks to EU funds, record-low unemployment and solid economic growth.

But economists have criticised recent plans for being too generous with spending and limiting room for manoeuvre in the budget, which could threaten investment plans.

The ANO-Social Democrat coalition is already frayed due to public protests, a spat over investigations into Babis’s alleged conflicts of interests and a row over who should run the culture ministry.

The Communist party, whose support in parliament gives the government a majority, wants a lower central state deficit target.

The central budget accounts for the bulk of public commitments, including financing regional governments and healthcare.

The Finance Ministry forecasts the economy will grow 2.4% a year in 2019 and 2020 and sees a slight overall fiscal surplus remaining this year before a 0.3% gap next year.

Reporting by Jason Hovet; Editing by Edmund Blair

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