Havlíček: The era of balanced budgets in Czechia is over for good

Deputy Prime Minister and Minister of Industry and Trade Karel Havlíček has said that the 2027 state budget deficit of 389 billion crowns is not "a road to bankruptcy" but the most groundbreaking budget since the 1989 revolution. The opposition calls such a deficit madness, but according to Havlíček, it was the same opposition that previously allowed a combined deficit of 1,200 billion crowns while manipulating the figures.

Twenty economists had earlier issued a joint statement arguing that, given low inflation, minimal unemployment, and the absence of a financial, pandemic or military crisis, such a jump in the deficit and debt-servicing costs is unjustified. Havlíček disagrees: he says economic growth in the country remains weak, and Czechia finds itself in an exceptional international situation — defence spending has risen from roughly 80 billion crowns in 2021 to nearly 200 billion crowns today.

Chaos in defence procurement

Asked whether Defence Minister Jiří Šedivý — sorry, Jiří Zuna — Prime Minister Andrej Babiš, or he himself actually knows how much Czechia will really need for security by 2035, the deadline set by NATO commitments, Havlíček admitted: there has never been full clarity, and there still isn't. According to him, past procurement was chaotic, didn't always align with NATO plans and concepts, and some equipment was bought at clearly inflated prices at the last minute.

One of the main tasks now, the deputy prime minister said, is to spend these 200 billion crowns on what is genuinely needed rather than chasing formal targets. He noted that in modern warfare, where drones costing a few hundred dollars can change the course of a battle, expensive tanks can end up sitting idle. Alongside external defence, the government intends to invest in the country's energy, industrial and cyber security, while also factoring in migration risks and the possible arrival of veterans from the war in Ukraine.

Energy, AI and money for Dukovany

Significant funds, Havlíček said, are going not only toward completing the Dukovany and Temelín nuclear plants and small modular reactors, but also toward preparing gas-based energy sources and strengthening the grid — amounting to tens of billions of crowns more every year. The government has also approved a 100-billion-crown AI Gigafactory project, in which the state will take part in order to bolster the country's resilience in artificial intelligence — including in light of the Volkswagen crisis, which could seriously hit the Czech automotive industry.

Pensions, taxes, and construction without bureaucracy

As for pension reform, Havlíček stressed that it does not affect next year's budget and concerns the period after 2030. For now, the government is focusing on the most vulnerable group — people over 80 — while planning to encourage those who wish to keep working past retirement age with higher payouts.

The deputy prime minister considers raising taxes a short-sighted move: he says it might give the budget brief relief, but over five to ten years it would hurt the country's competitiveness and push businesses to relocate to more favourable tax jurisdictions. Instead, the government is betting on deregulation — in particular, a new construction law introducing the principle of "one office, one stamp" and drastically shortening approval times, while structures up to 60 square metres will be exempt from building permits altogether.

Havlíček also commented separately on the state's buyout of minority shareholders in ČEZ's generation business, calling it a step toward energy security: according to him, all the risks of long-term energy contracts, including nuclear and gas projects, ultimately fall on the state rather than private shareholders, while the decision itself, he insists, will not require a single crown from the budget.

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Around Prague, based on reporting by denik.cz