Fiala said the government was implementing anti-inflationary measures, but the current 12.7% rate was not their fault. Photo credit: vlada.cz.
Prague, June 5 (CTK) – The cabinet is not responsible for the current high rate of inflation, said Czech PM Petr Fiala in a televised debate yesterday, while ex-PM and opposition leader Andrej Babis (ANO) pointed to the cabinet’s decision last year not to set price caps on electricity for producers as the cause of inflation.
In the debate on CNN Prima News, both men agreed that they agreed with the decision by Babis’s government to abolish the super gross wage, despite some economists saying that it was a significant inflationary stimulus that also worsened the budget situation.
The measure was pushed through by Babis’s cabinet, with support from Fiala’s Civic Democrats (ODS), then in opposition, and the opposition Freedom and Direct Democracy (SPD).
Fiala said in the debate yesterday that inflation, which hit 12.7% year-on-year in April, had three causes: the rise in overall government spending during the COVID-19 epidemic; the energy crisis; and rising margins in the production chain from agriculture to retail.
He said the government is taking anti-inflationary measures. He called on Babis to reduce margins at Agrofert, his giant chemical, agricultural, food and media holding, which forms a significant proportion of the agricultural and food sectors.
Babis, on his part, accused the government of being comfortable with high inflation because it helps raise more money for the state budget. “This government does not like people; it taxed them with inflation, now it will tax them with tax increases,” he said, referring to the government’s planned package aimed at consolidating the public finances.
As for the abolition of the super gross wage, both politicians agreed. “It brought additional money to people. It was the right decision,” Fiala said.
“We gave people money, I am proud of it, they have reserves,” Babis agreed.
Elsewhere in the debate, Fiala admitted that this year’s budget deficit is not developing well, but insisted that it is not yet certain that the government will fail to meet the approved deficit of CZK 295 billion for the whole year.
The cabinet still expects revenues from the windfall tax, a dividend from the CEZ state-controlled energy utility, and money from European funds in the summer, said Fiala. Only then will it become clear what the actual state of the budget is, he added.
The state budget deficit reached CZK 271.4 billion in May, up from CZK 200 billion in April. This is the highest budget deficit for the first five months of the year since the Czech Republic was founded in 1993. Last year in the same period, the deficit was CZK 189.3 billion.
In response to the negative development of the budget, Finance Minister Zbynek Stanjura (ODS) intends to submit a proposal to the government next week for savings of around CZK 20 billion in the second half of the year, the Finance Ministry said earlier this week.
“Things are not going well, but I cannot yet say that we will not meet [the planned deficit ceiling],” Fiala said yesterday.
He said the rapid growth of the deficit was due to an increase in social benefits and pensions of almost CZK 50 billion, assistance worth CZK 40 billion for companies and citizens to deal with high energy prices, and an increase in the costs of servicing the national debt.
“At the same time, we expect revenues from windfall taxes, a dividend from CEZ and money from European funds during the summer. The revenues will come only during the summer and we will see during the summer what the real state of the budget is,” Fiala said.
If it turns out that the cabinet is not able to keep to the planned deficit, it is ready to make savings this year, he added.
Babis said Fiala was making excuses about Ukraine. He called on Fiala to say how much the government has spent on aid for refugees and weapons.
Fiala said that the total aid to Ukraine is in the lower tens of billions of crowns, and that by the end of the year it will be around CZK 30-40 billion. A part of the sum goes to support Czech citizens, municipalities and regions that are helping refugees, Fiala added.
