Czech 2027 budget: deficit grows, and Babis is not worried

The Czech Chamber of Deputies backed the 2027 state budget in first reading, with the second-largest nominal deficit in the country’s history. The debate dragged on unusually long, over two sitting days, and was not without emotion. Passage of the budget is all but certain, and the hole of debt Czechia has been sliding into since the pandemic and the abolition of the “super-gross” salary will become noticeably deeper.

Almost all coalition deputies voted for the budget in first reading. Miroslav Sevcik and Zuzana Majerova (SPD) abstained, and Culture Minister Oto Klempir voted against, though reportedly by mistake.

Record investment and a record deficit

Prime Minister Andrej Babis and Finance Minister Alena Schillerova stand their ground: it cannot be done any better. The budget is described as record-setting for investment, yet the deficit exceeds record investment by roughly 100 billion crowns, which the state will have to borrow to cover its day-to-day operations. In their words, any attempt to save would lead to an economic collapse, an energy catastrophe, a breakdown of healthcare, the collapse of road construction or a sharp fall in living standards.

The opposition considers the draft budget itself to be the catastrophe. ODS, for example, proposed how to save more than 100 billion crowns in Schillerova’s draft. But this plan, as the author of the commentary notes, has “elephants in the room” that ODS prefers not to notice.

What is wrong with the ODS plan

Shifting payments for renewable energy sources onto the state budget could indeed be replaced with targeted support — that is 20 billion crowns. But the same “laziness” was shown by ODS during the energy crisis after the collapse of Bohemia Energy and Russia’s invasion of Ukraine. ODS proposes saving another 11 billion on the state’s payments into the health insurance system for “state-insured” people. However, the current situation in healthcare is a direct result of the previous government led by ODS.

The proposal to collect five billion more by “equalizing alcohol excise taxes” the author calls especially amusing: former Finance Minister Zbynek Stanjura abandoned the tax on still wine after the very first pressure from the wine lobby. If you subtract general phrases such as cutting the operating costs of state administration by 10 billion, “rationalizing inclusion” by three billion and “better targeting of social benefits” by another three, little remains of the grand savings. Ahead of the 2021 election, ODS also promised to save 100 billion every year, but Petr Fiala’s government never got there.

How Babis differs from Fiala

There is still a difference between the Babis and Fiala governments. For most of the Fiala and Stanjura era, the deficit’s share of the economy was falling; although accumulated deficits increased the national debt by 1.2 trillion crowns, consolidation efforts were visible, and the government itself was at least a little ashamed of deficits and wary of the pace of debt growth.

Babis, as the author writes, is not frightened by debts and deficits. The prime minister is convinced of the need for a whole range of expenditures, and the state deals with the shortage of money by increasing debt. There are no concrete consolidation proposals either on the table or in the government’s legislative plan for next year, although budget forecasts say Czechia faces a painful cut in spending of many tens of billions of crowns in 2028. Instead of real measures, in the author’s assessment, there are small revenues from kratom users and “castles in the air” worth tens of billions from the fight against illegal gambling.

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Around Prague, based on reporting by seznamzpravy.cz