Press Conference after the Meeting of the Government, Held on Monday 25th May 2009

Roman Prorok, spokesman of the Government of the Czech Republic: Good afternoon, ladies and gentlemen, I welcome you at this postponed, but still organized press conference after the cabinet meeting. I welcome also the Prime Minister Jan Fischer, the Ministers of Justice, Finance and Health, who will answer any of your questions relating to the topic of this conference. First, I would ask the Prime Minister for an introductory speech.

Jan Fischer, Prime Minister of the Czech Republic: Ladies and gentlemen, once more good afternoon to you. We had a busy schedule and therefore we have arrived so late. First, the Government agreed at this meeting on the text of the policy statement and on a government resolution which authorized me to ask the Speaker to insert an item concerning the vote of confidence to this Government in the agenda of the Lower House meeting. I will do so officially tomorrow at nine o’clock, when I will visit the Speaker and hand him over the letter. For your information, the policy statement is structured as follows: after the necessary introduction, where we explain against the basis on which the government was established, we describe the conduct that may be expected by the citizens from the Government. It will be an apolitical government refraining from any radical political proposals, substantial legislative changes etc. Thereafter, the policy statement describes what the Government will not do and primarily what it intends to carry out in the course of its mandate. The priorities will not be surprising. Completion of the Presidency, adoption of a budget not exceeding a deficit of a 170 billion CZK, i.e. about 5% of the GDP deficit, and maintaining smooth operation of the state administration until the early election term. The following part of the policy statement is structured in accordance with individual areas, listing the tasks which the Government expects to face during its term. That is all about the policy statement. We had a very interesting debate about the proposed medium term expenditure frameworks for 2010-2013. The Government agreed on the need to prepare a restrained budget. The basic parameters for the following year are clear, nonetheless, the resolution was very comprehensive; some issues have to be clarified between individual resorts and the Ministry of Finance and we have awarded ourselves one more week to resolve these issues. That is why we adjourned the Government meeting at this point and we will continue next week. We adjourned the meeting at the time when virtually every member of the Government had a chance to make his comments. I appreciated the approach of the members of the Government and for their readiness to contribute genuinely to the establishment of a low budget, although it will be very difficult in a number of chapters, mainly due to the mandatory expenditures on the expenditure side that cannot be influenced by this Government and whose share is very high and this Government can do nothing with them. We approved a number of laws resulting from the initiative of MPs or proposed by government departments - after all, you are familiar with the Government programme. The bill on audiovisual media services provided upon request and on the amendments to certain other laws (what a complicated title!) did not find support; however, it was rejected mainly due to the fact that we were surprised by the scope of the competencies that would be vested in the Council for the Radio and Television Broadcasting; that is why the bill submitted by the Minister of Culture was not accepted. The MPs draft of the land communications act - 160 kilometers, close person – was rejected. To be understood correctly, the Government has issued a set of recommendations which indicate that our position is negative, but it is up to the Chamber of Deputies to decide how to proceed and whether it will accept these recommendations and adopt the relevant decision. The Government opinion does not mean the end of the world, and it will be up to the Chamber of Deputies to decide whether to take or not to take into account this opinion or to determine the extent to which it will be taken into account. As regards the MPs amendment to the Criminal Procedure Code, which you call the “Muzzle Act”, the Government accepted some recommendations in this respect, but it will not dwell on it any further, because you will receive tomorrow a separate press release. I would only remind that I will meet tomorrow with Minister Kocáb and with editors-in-chief of Czech periodicals who addressed me with regard to this matter and I want to discuss it thoroughly with them. I believe that this is all with regard to the Government session; there was also a request to strengthen Transport Infrastructure Fund, which was presented to the budget committee. Since some things have to be clarified, I would refer to a very legitimate opinion of some Ministers that since this material has been presented only today, they need to familiarize themselves with it. Therefore we have postponed its review for one week. This is all from my side and I am prepared to answer your questions.

Roman Prorok, spokesman of the Government of the Czech Republic: Would the Minister of Health like to make some additional comments.

Daniela Kovářová, Minister of Justice: I am also prepared to answer your questions.

Roman Prorok, press officer of the Cabinet of the Czech Republic: Great, ladies and gentlemen, it is upon to you, please present your questions.

RTA: I have a question concerning the audiovisual act: you said that the Government did not accept it but could you provide to us more details as to why it was not accepted?

Jan Fischer, Prime Minister of the Government of the Czech Republic: This is my topic and I will elaborate on it further. The issue of this document was easily settled, because the Minister stepped back during a very vigorous discussion concerning the budget, and gave up his request for an increase of the number of employees in the Council for Television and Radio Broadcasting. This was agreed by the Government. However, it was noted during the discussion whether this was the real reason for failure of this proposal, since we were somewhat irritated by the scope of competencies vested in the Council. Imagine composing a digital programme or some other programmes – you will compose such programmes by yourselves and it will become a common tendency within the next 10-15 years. That is why the level of supervision from the Council's side seemed too high to us. Our opinion is simply based on the principle that if someone breaches the law by broadcasting pornography at ten a.m., or such “self-righteous” spots as those broadcasted the other time by the National Party within the Czech TV commercials, etc., this does not require any supervision but compliance with the law. The extent of this supervision seemed excessive also with regard to the expected development of digitalization and dissemination of internet services. This was the main reason.

Roman Prorok, spokesman of the Government of the Czech Republic: Thank you; Nova TV.

Nova TV: I have a question for the Minister of Finance. How did he succeed with his plan to freeze salaries – would this result in a decrease of teacher salaries as regards their bonuses? What was the response of his colleagues from the Government?

Eduard Janota, Minister of Finance: Good afternoon. I will be rather specific. I put forth a certain concept concerning the solution of budget problems for next year. The Prime Minister indicated that the situation is very complicated because the Government can actually influence only 18% of budget expenditures. I submitted to the Government a detailed specification of a structure which I applied to this year's budget scheme. In this part, the Government can carry out executive measures. Unfortunately this field covers all essential aspects - current expenditures, wage expenditures, investments, everything that has a very significant effect on the operation of the whole public sphere. The budget strategy was based on the fact that some common procedures and approaches would be carried out. One of these measures was the freezing of wage increase; this approach was accepted by all Ministers on the basis of a discussion and of my estimates. The Ministers also took a positive approach to the necessity to resolve the problem of so-called “vacant positions”, since the wage funds allocated to these positions were actually used by some ministries to cover other than wage expenditures, while other ministries used them for the increase average wages. Since we limited the volume of wages in the 2009 budget, the government departments have no other choice than to decrease the number of employees below their systematization limits if they wish to increase the average wages. That was one partial approach. We have agreed with the Prime Minister - and I have to say that I feel his support to the budget which I intend to propose and which will be one of the most economical budgets that I have ever put together -that it will be up to the government departments that will receive certain limits to decide how to cope with them. I will not be the one who will determine were they should save, what they should save and how they should proceed. The general recommendation is as follows: precedence should be given to such priorities as science, education, infrastructure, complementary financing provided in addition to financial means provided by the European Funds. Based on these priorities, we also decided to cut back on expenditures of individual chapters. This cutback exactly reflects these priorities and is generally applied on 4 levels. A part of the government departments (e.g. the Ministry for Education) have 5% cutbacks; a part of the smaller government departments have 10% cutbacks and the rest of the government departments will have 15 or 20% cutbacks of those expenditures which will be possible to be curtailed. Thus, such cutbacks will not apply to the whole budget volume, but only to the part where such cutbacks are possible. This is all about this procedure. It may happen, of course, that some ministries will have a problem with the ensuring some functions of public property. The Government allows the government departments to revoke or cancel some governmental resolutions, which generated budget claims and which could be implemented in the period of the 5-6% growth of the economy, but which cannot be carried out at the time when the economy has dropped by some 2.3%. This is a key difference. Furthermore, I have to state that the Government guarantees the compliance with all legislative standards concerning budget expenditures. It guarantees that it will secure the minimum valorization of pensions stipulated by the law, i.e. 2.8%. The average pension increase will not even reach 300 CZK. Other social benefits, the existence and the subsistence minimum are not based nowadays on a valorization scheme but on absolute amounts and these amounts will not change in 2010. As to the relation with the Ministry of Health or the of health insurance system, due to the fact that the amendment to the Insurance Act has not yet been approved (and I hope that it will be successfully approved) we have to valorize in 2010 the payment of the state for persons insured by the state, which will cost the budget 9.5 billion CZK. The state payment for such state insureds amounts to 790 CZK per insured. I also believe that we have allocated a sound amount of funding to the Transport Infrastructure Fund and the Housing Fund, which will maintain this year's standards with the integration of various forms of financing of the Transportation Fund. A reasonable level of co-financing of transport infrastructure expenditures will be secured from the European sources, the EIB’s loans, state budget, road toll and other items that are allocated into these funds. I am convinced that a certain group of “lobbyists” – excuse me using this term - will not be satisfied. Such lobbyist groups will demand and highlight in the media much higher sums in the state budget. Some summarized data. The budget which we discussed today presumed a deficit of 165 billion with the budget income in the amount 917.4 and expenditures reaching 1.082 billion. It is essential that this budget and the state funds comply with limitations which were established by the medium-term outlook. On the contrary, we can say that we are 8 billions below the limit determined by a resolution of the Chamber of Deputies for this year. The deficits have the same trajectory, i.e. 160 for 2011 and 156 for 2012. It has to be noted in this respect that if no legislative changes in the whole range of mandatory expenditures are made, then the formation of the budget in these conditions will be more complicated year by year and I believe that the fulfilment of the Maastricht criteria is rather far away under such circumstances. Now what will happen if we comply with these indicators. The national debt will develop on the basis of the budget deficit, will exceed by 165 billion the actual amount of this year and will reach some 1.4 trillion CZK. Interest expenses are growing rapidly, which represents the greatest risk. While this year's budget predicted 48 billions, then the expected actual interest expenses will reach almost 54 billion, based on the estimated 150 billion deficit; next year, they will reach 65 billion and in the following years, they will reach 76 billion and 87 billion, respectively. Here you can see how much complicated it will be, given the estimated development of interest rates and the market pressure resulting from fact that the vast majority of countries have fallen into complicated fiscal problems and will issue [government bonds]. We have to realize that countries with 3A rating, which are viewed be the investors as being in a better situation, will also enter the market. This will be one of the key tasks of this Government, which will try not to permit any fatal worsening of the budget balance. As regards the deficit calculated by the ESA 95 method, we can say that while we expect a 4.5-4.7% deficit this year, the budget for the following year is based on estimated 5% deficit. The estimated budget deficit for the following year 2011 4.8% and the 2012 estimate is 4.2%, i.e. much more than 3%. If we realize that if we wish to enter into the Monetary Union, we have to maintain for two years a currency exchange system, you can easily estimate when it will be realistic to speak about the entry of the Czech Republic into the Monetary Union, if a change in the structure is not made. If we did not adopt any active expenditure measure and maintained the current trend, the next year's budget would end up with a 220 billion deficit and its ratio to the GDP would exceed 7%. By our measures, we have reduced the risk of financial distortion by 2%, which I consider as a major success. I have to point out that the budget contains all arrangements on the offer and the demand side which resulted from the resolution of the Mirek Topolánek's government, from legislative amendments which were submitted by Minister Kalousek, including, of course, the latest amendments relating to changes in the value added tax, depreciation and reduction of insurance premiums for employees. It also contains changes which became a part of the agreement between the Social Democrats and ODS in the course of the latest meetings and which concerned child allowances, the Insolvency Act etc. Concerning the scrap allowance, I would like to explain my position here. I am not a supporter of the scrap allowance. As regards today's articles which accused me of changing my opinion according to the development of this issue, I would like to say that I stated in my yesterday's discussion with Václav Moravec that agreements should be complied with and that the agreement that has been made is based on the fact that this Government will prepare a model and will resolve procedural, technical and also financial aspects of this issue. Nothing more and nothing less. As regards the vacant position, I would like to clearly document here that the conclusion that the government departments have permanently an abundant number vacant positions has not been made in an ad hoc manner but is based on a very serious information – on the final accounts of the ministries and of the state, which are presented every year to the Chamber of Deputies. I will give an example from the year 2008, including my own ministry. The Ministry of Defence had 1880 unoccupied positions, Ministry of Finance 1037, Ministry of the Interior 2666, Ministry of Education 9049 and Ministry of Justice 1255 unoccupied positions, i.e. a total of 18,171 positions. If someone says that we took those numbers out of nowhere, it is not true, because you can find them in individual chapters of the draft final accounts. This has been my brief answer as regards the budget. I feel that, based on the Government presentation and on the summary of the Prime Minister's opinion, the Ministers understood the complexity of the situation and their approach to the finalization of this proposal will be positive, because if the ministers approve the limitations of the next year's budget, they will finalize in the summer months their own budgets within these limits, and not an inch above, into a proper document, which should be discussed some time at the beginning of September. That is all concerning the budget and the schedule relating to the state budget. It is, however, a question what will become of this budget; we have to present it to the Chamber of Deputies on 30 September. It is probable that elections will be held and it is a question what the new Government will do with this proposal. The most likely outcome from the legislation perspective will be either its refusal or its adoption and further review. If the budget is not approved and reviewed by the Chamber of Deputies until the end of the year, a provisional budget arrangement will be established and the budget would be governed by the 2009 budget approved by the Parliament, i.e. with the deficit of 38 billion CZK. That is all concerning the Government discussions - one more final remark. Last night, the Prime Minister met with members of the National Economic Council of the Government, which I attended. I have to say that the approach of the Ministry of Finance was appreciated by all Council members and even some stricter variants were proposed. Nevertheless, when we explained the position in which we are, given the legislation perspective, the Council expressed its consent with the approach of the Ministry of Finance.

Roman Prorok, press officer of the Cabinet of the Czech Republic: I thank the Minister for his answer. The Minister of Justice wishes to add a few words.

Daniela Kovářová, Minister of Justice: I wish to add only two sentences to what has been said by the Prime Minister and the Minister of Finance. I have to say that the discussion about this item of the Government agenda was not easy. Any way, it is evidenced by our presence here at this late hour and it would be obviously very easily for each Minister to raise claims to the Minister of Finance in order to ensure the operation of his/her ministry. On the other hand, I have to say that all Ministers behave very responsibly and all of us understand that we have to think about reserves in our ministries to be able to cope with what the Minister of Finance has said here a while ago.

Eduard Janota, Minister of Finance: One more additional remark. Why the discussion about this material was adjourned: we finalized the budget at night and I presented the basic numbers in the morning. I fully understand that the Ministers wish to have some time to familiarize themselves in detail with this material. I can say that I have expected that the discussion will end in such a way. The adjournment is not a surprise to me.

Roman Prorok, spokesman of the Government of the Czech Republic: Thank you. Czech TV.

Czech TV: The Minister has essentially answered my question by his latest remark. I would put a more detailed question to the Prime Minister with regard to the one-week adjournment. I see that there is no minister nominated for the Social Democratic Party (ČSSD) present at this conference; was apparent that the ministers nominated by ČSSD were more reluctant than ministers from the other parties as regard this planned tightening of belts?

Jan Fischer, Prime Minister of the Czech Republic: I did not feel that there and I was glad.

Roman Prorok, spokesman of the Government of the Czech Republic: Thank you. The Czech Press Agency (ČTK).

ČTK: I have a similar but a more general question. Do you believe that you will satisfy the political parties by this policy statement? Have you fulfilled all recommendations you have received? Thank you.

Jan Fischer, Prime Minister of the Czech Republic: You have used a correct term by calling them “recommendations”. This is a good characteristic. I have considered them as recommendations. We complied with vast majority of them, since they did not cause any problems to us. There are some items that will be still discussed, such as the airport privatization and others, but these are very limited. The policy statement is a document characterizing the Government's will to fulfill such and such tasks to their best knowledge and belief and to present this to the Chamber of Deputies and I believe that the Government will win confidence.

Roman Prorok, spokesman of the Government of the Czech Republic: Thank you.

E15: A question to the Minister of Finance: do your remarks about limits set for the ministries, which will be left to cope with it by themselves mean that there will not be any list of cuts prescribed by the Ministry of Finance, except for freezing of salaries

Eduard Janota, Minister of Finance: It is exactly so. Each minister knows better the problem of his chapter and it is logical, reasonable and correct that they will decide by themselves about their priorities and less urgent matters, I consider this as a reasonable step. The limits have already been set.

Jan Fischer, Prime Minister of the Czech Republic: They will receive the limits which will be binding and they have to fit into them. It is up to them to make their own internal arrangements, they must respect the limit and no other lines will be set.

E15: I would ask a supplementary question. ČSSD imagines that the viability of your budget will require the preparation of an alternative cut lists. Will the Ministry prepare any such lists?

Eduard Janota, Minister of Finance: No. I would not like to do any such alternative cuts. I know what media uproar was caused by a misprint according to which it was recommended to strike out subsidies for private schools. It was a misprint; nevertheless, having had such experience, I do not want to use such method. I believe that the other ministers know much more details about their chapters.

Roman Prorok, spokesman of the Government of the Czech Republic: One more questions of the Czech TV.

Czech TV: I would ask the Minister of Health whether the Government has discussed the purchase of vaccines against Mexican flu. Have you got any updated information?

Dana Jurásková, Minister of Health: The Ministry of Health is preparing a material for the Government to take such decision. The measures should be twofold: an increase of the stock of antivirus medicines, because, as you have been informed, the Czech Republic currently has Tamiflu for 20% of the population, while WHO recommends up to 30%. The other measure is to ensure the vaccine. Since the Czech Republic coordinates all these steps with all EU Member States, we are preparing a material for the Government which will enumerate all possibilities. You can definitely imagine that these are large amounts of money and that there are a number of predictions and problems with such vaccination which are not yet finalized because the virus has been mutating. Thus, there are a number of risks and we wish to provide to the Government all information so that it can issue an informed decision.

Roman Prorok, spokesman of the Government of the Czech Republic: Mladá fronta Dnes.

MfD: As to the policy statement of the Government, I would ask which privatization projects are listed in that material as pending or to be completed under this Government? And one more general question: why you do not want to publish the statement before its presentation to the Chamber of Deputies? As regards your negative opinion on the MPs bill about the increase of permitted highway speed limit, could you provide us with some details – what were the specific aspects you did not like?

Jan Fischer, Prime Minister of the Czech Republic: To the policy statement: I did not say that we will not publish it. We are looking for a method to determine when it will be published; we do not even know the date when it will be discussed at the Chamber meeting. I would like to point out that the constitution knows only the institute under which the Government is to ask for confidence. It does not know any duty to present a policy statement; however, it is a good tradition in this country. The government is prepared to present such statement and will not break this tradition. This statement is not based on any coalition agreements or election programmes; it will be very brief and concise. We will still discuss and decide when and whether we will publish before presenting it to those for whom it is designated – the MPs. The other question was addressed to the Minister (of Justice). I am sorry but the statement does not include a list of privatization projects which will be or will not be carried on by the Government.

Daniela Kovářová, Minister of Justice: I will answer the question why the Government did not support the MPs proposal to increase speed limits at land communications - highways. This is a simplification – this proposal did not contain only this item, but a number of other items and I am sure that this sole item would not be rejected by the Government. However, the Legislative Council did not recommend to the Government to approve this proposal due to its technical legislative deficiencies. Moreover, some proposals resolved by this proposal have already been resolved by other regulations. This was the reason for its rejection.

Roman Prorok, spokesman of the Government of the Czech Republic: Yes, please.

Prima TV: I have a question to the Prime Minister. It concerns the management of the Supreme Audit Office. We have been informed that the amount of funds spend on the operation and employees of this office is the highest in the state and this issue is being discussed by the controlling committee of the Chamber of Deputies: I would like to know your opinion- what do you think about it? Wouldn't it be appropriate to replace the head of this office?

Jan Fischer, Prime Minister of the Czech Republic: Personal changes at the Supreme Audit Office are outside the Government competencies and are proposed and approved by the Parliament. This question should be addressed to the Parliament. That is all what I can answer on behalf of the Government. Otherwise, economical use of the budget should be the task of each head of a government department.

Eduard Janota, Minister of Finance: As regards this question, I would remark that the Supreme Audit Office is one of the chapters with the so-called special management regime and its budget is not actually approved by the Government but by the budget committee and the Government respects almost 100% of its recommendation. If you point out now that the Supreme Audit Office has some reserves in its budget, this is also due to the budget committee, which is more responsible for this budget chapter than the Government.

Roman Prorok, spokesman of the Government of the Czech Republic: Thanks for the answers. Another question please.

MfD: I would like to ask Minister Janota about the liquidation of vacant positions – would it require a change of a law or would the Government approval be sufficient? Another question: you have said that you will cut 5-10% of expenditures which you are able to cut. I will present an example: 95% of the expenditures of the Ministry of Labour and Social Affairs are allegedly mandatory, which means that 5% of its expenditures may be cut- will you cut some of these five percent? Thank you.

Eduard Janota, Minister of Finance: We do not need any legislation to cancel the vacant positions; it is an executive step of the Government. The problem lies in the fact that the ministries have a certain systemization with respect to which they allocate their funds and such funds are either received by a lower number of employees or are used for other purposes. Your information that 95% of the expenditures of the Ministry of Labour and Social Affairs are mandatory is absolutely false and misleading; its mandatory expenditures are far below such level.

Roman Prorok, spokesman of the Government of the Czech Republic: Another question please..

Právo: I would like to know the total number of such vacant positions and the number to which you intend to reduce them. What is the amount of savings brought about by such step, which ministries will be affected and which will not be affected?

Eduard Janota, Minister of Finance: I have said this here. We will tolerate 1% if vacant positions in each chapter and the rest which exceeds this number amounts, according to the data in the final accounts for 2008, to 18,171 positions or, expressed in financial terms, to almost 5 billion crowns, including salaries and the relevant insurance premiums.

Roman Prorok, spokesman of the Government of the Czech Republic: Thank you. The penultimate question.

Hospodářské noviny: My question is addressed to the Prima Minister. The Academy of Science has published a statement informing its budget for the next year will be reduced by some 14 % and its budget for the following years by up to 45 %. This is included in its statement. I wish to ask if this is true and if it does not somewhat contravene the declared promotion of research and development? Would the Minister of Finance comment on this as well?

Jan Fischer, Prime Minister of the Czech Republic: Definitely. Please do not scare each other. There is plenty of information about what will be butchered, destroyed, curtailed, plundered, what robberies will be committed against the Czech science, against this or that. I say clearly and unequivocally that we have discussed today the expenditures. The debate about individual chapters is still ahead of us. However, this does not concern the Academy of Science, which has only two priorities and I am glad to it. In cases with 30 declared priorities, such items cannot be considered priorities. We have two priorities – science, research and transport infrastructure. I would remark that referring to a priority does not mean that after pouring into it the money agreed by us we will pay no further attention to what is happening there. On the contrary, I would be very happy if the priorities are assessed this time on the basis of analytical materials to indicate the branches of science and projects where we wish to invest the money. This has to be determined very specifically and the same applies to transport. Priorities do not mean vouchers for money which will be put into a pot and the lid will be closed and nobody will see into it. We will definitely find a possibility to discuss the matter with the Academy.

Roman Prorok, spokesman of the Government of the Czech Republic: One last question please

Deník: I would like to ask the Minister of Finance if he can specify the ministries or government departments that will be most affected by cuts of non-mandatory expenditures?

Eduard Janota, Minister of Finance: This results from the logic of this matter that I have outlined here. We have certain priorities which were referred to by the Prime Minister and by inference from such priorities and from other indicators relating to specific balances of the government departments, we have set the departments whose non-mandatory expenditures will be cut by 5%, 10%, 15% or by the maximum of 20%. This is a general answer that can be given at present, because the debate about this limit will be finished next Monday, as I hope, when this material is to be approved.

Jan Fischer, Prime Minister of the Czech Republic: This reduction is not straightforward as it used to be. Big ministries will be treated differently as compared to small ministries, because we know that if we cut the small ministry's expenditures by 20%, we may close it down. We known where there are the priorities to which I have referred; another priority is the co-financing of the European project to be able to obtain the European money and not to complicate out access to them. We count on this automatically.

Roman Prorok, spokesman of the Government of the Czech Republic: Thank you, ladies and gentlemen, I close this press conference. There is other work ahead of us. We apologize for the late start and look forward to seeing you again.