Press conference of the Prime Minister Mirek Topolánek after the meeting of the government held on 12th September, 2007

Martin Schmarcz, Head of the Press Unit: Good afternoon, ladies and gentlemen, welcome to the press conference after the meeting of the government. I welcome the Prime Minister, Mr. Mirek Topolánek, the Minister of Finance, Miroslav Kalousek and the Deputy Prime Minister, Alexandr Vondra: In the introduction the Prime Minister will inform you on today's meeting. Then we will continue as usual and perhaps some time will rest for your questions.

Prime Minister of the Czech Republic, Mirek Topolánek: Thank you, good afternoon. The key issue of today's meeting was, of course, the Bill on the State Budget. We indicated clearly that we would probably close our debate next week and we would approve it following a voting. Today, a general debate on the main parameters of the budget was held, and then detailed debate continued. Minister Kalousek will inform you on it in detail. In addition to that, we approved the Information Report on Implementation of the Programme Objectives of the Government. You will be given more detailed information at the regular Monday's briefing. We just stated today that some tasks are being fulfilled and some task show certain delay. Alexandr Vondra will inform you on a change at our permanent representation to the EU. By the way, we approved of course lots of less important points, we amended the Act on Budgetary Rules; Minister Kalousek will inform you on it. Long and repeated debate was held on the Act on Consumer Protection, where two different attitudes were presented. The first one was very detailed stipulation, and this attitude finally won after very strict debate. I would say that very detailed stipulation concerning unfair competition won over more general interpretation preferred by the Czech Republic. It concerned a transposition of a directive and it was shown that the pressure of European directives to regulate the individual spheres of our life is something that every government will have to cope with, as it causes weed infestation of our legislation. Practice used by our courts was different so far. Long debate was also held on local referendum. Finally, we adopted an amendment which repeals a provision of the act, based on which the Ministry of Interior could dissolve a local authority in case of disregard of local referendum results. The principal arguments consisted in the fact that no such a case occurred in the last fifteen years of validity of the law. In spite of the fact that cases of referendum disregard took place, nobody wanted to risk a legal action which would undoubtedly be decided by the Constitutional Court in the end. Thus, the local authorities will bear only political responsibility, in case of disregard of referendum result, in the following elections. In case of local referendum we decreased, in the proposal which will be passed to the Chamber of Deputies, the necessary quorum of participation from 50% down to 35%; it means that referendum is valid in case of 35% participation of citizens. Referendum is deemed to be binding in case of 25% of positive answers. Thus validity and binding character of referendum are specified; it is a proposal which gained support of the coalition. Therefore we did not approve the proposal submitted by certain deputies of the Social Democratic Party. We approved a very important matter; I mean the subject-matter of the Act on Census in 2011. It evoked a debate on classified information, data security and it also led to detailed proposals which would be included in the legislation prepared based on this subject-matter of the Act. A key issue, from my point of view, was the issue of state performance improvement, about which Minister Kalousek will inform you; it concerned the integration of collection of taxes and duties. I would ask Minister Kalousek to comment also the assessment of economic result of public health insurance including that negative outlook, which we expect, in spite of the fact that it is a positive matter. We decided today on the procedure concerning transformation and privatization of Letiště Praha (Prague Airport) and ČSA (Czech Airlines). As to the points which are worth mentioning, I think that an important debate was held on the integrated information system on structural funds; we postponed the debate until next week. I think that it is all, as to the point which are worth mentioning. I ask both colleagues of mine to comment those issues that I have ask them to comment.

Martin Schmarcz, Head of the Press Unit: I thank the Prime Minister. The Minister of Finance will be speaking as the first one.

Miroslav Kalousek, Minister of Finance: Good afternoon, I will try to be brief and I will be available to answer your questions. The government debated basic parameters of the Bill on the State Budget, as you had been informed last week. As a submitter, I very appreciate very rational discussion and attitude of my colleagues. In spite of the fact that it is obvious that no ministry is content with its financial means, I am very delighted by the fact that the government has a common will to economize. The government has common will to stabilize public budgets. And the course of the debate corresponded to this fact. It is a tradition that the Bill on the State Budget is debated at two meetings of the government, at a minimum. Therefore the debate was suspended. Several transfers will take place, which are rather of a marginal character. I mean some tens or hundreds millions. It will not certainly be billions crowns, and I am convinced that the government will approve the Bill on the State budget for 2008 next week. It is the first reform proposal, as it has connection with the law approved by the Chamber of Deputies – the Act on Stabilization of Public Budgets. The bill respects that parameter of the deficit of public budgets below 3%, the proposed parameter is 2,95, according to the methodology ESSA95 used by the European Union. The deficit according to national methodology is even lower, it is 2,5%. But we must use the methodology ESSA95 and even in this case we observe that parameter. I would say that this government is the first one regarding two principal approaches. The first approach concerns observance of medium-term expenditures. They are binding for every government since 2004 according to law. Every government has breached this obligatory commitment since the provision became a part of the legal order of the Czech Republic. The Topolánek´s government is the first government which will observe the law, since it was been approved. Binding medium-term limits will be observed. The second change in comparison with the practice of last eight or nine years is that after I bring the corrected state budget to the meeting of the government, I will bring a budget with the same revenues, as they were submitted today. The practice of the last nine years was that always after the first debate on the Bill on the State Budget and following great pressure on increase of expenditures, revenues were suddenly increased. Thus several billion crowns were "born" between the first and the second Wednesday, so that a government did not need to increase the deficit and could increase expenditures. This government will not repeat this procedure. It will estimate its revenues in a conservative way, and in case revenues are higher that those expected, we will use them for the deficit decrease, not for wasting money. These were two principal approaches to the state budget which was debated today. Furthermore I was asked to make some comments regarding the Bill amending the Act on Budgetary Rules, which was debated today. It is a brief amendment which is rather of technical character aimed at good transfer of financial means from the EU and; it amends provisions concerning reserve funds. The respective ministries will not have their reserve funds, but they will be able to increase their expenditures by money which will not be spent. Furthermore the government approved and supported the project of the Ministry of Finance Integration of Tax and Duty Administration. I suppose that you know that we do to want to have two administrations; the tax administration and the duty administration, but our objective is to have one integrated administration with fewer people who will be better paid, who will work more effectively as to the client approach is concerned. Furthermore, the government submits the issue of the public health insurance to the Chamber of Deputies. Economic results of public health insurance companies in the last year were very satisfying, of course. The health insurance companies are in very good shape, but there is the "but" I want to draw your attention to. In such a good shape they are because of the significant increase of payments for persons whose health insurance is paid by the state. It means that from the point of view of public budgets we just transferred money from the left pocket of our jacket to the right pocket. We improved economic results of health insurance companies and increased the deficit of the state budget. Payment for persons whose health insurance is paid by the state will reach nearly 47 billion crowns in this year. I think that this situation must be used for economical spending money; it is not a call for expansion of expenditures of health insurance companies. Alternatively, we would get to the same situation after some three years. Now, I am available in case of your questions. Thank you.

Martin Schmarcz, Head of the Press Unit: I thank the Minister of Finance and now the Deputy Prime Minister Vondra has the floor.

Alexandr Vondra, Deputy Prime Minister: Good afternoon, ladies and gentlemen. Some of you were very interesting in the future of our permanent representation in Brussels during the silly season. Well, let me inform you that the government decided today that our existing permanent representative to the EU, Jan Kohout will be removed. The former Minister of Agriculture Milena Vicenová was appointed as the new representative at the EU. We suppose that a factual change will take place by the end of this year, so that new representative could be in spot the entire year before beginning of our presidency to the EU. As to the appointment, I would like to emphasize three things. First, Milena Vicenová knows the EU very well, and she has ten-year experience with negotiations in Brussels on various issues. Formerly, in 1990´ started with negotiations of the first development programme for the Czech province. Now, after finishing her work as the Minister of Agriculture, became the first secretary who helped Jiří Čunek to negotiate the time framework of using money from the European funds. These negotiations were successfully accomplished in summer, in spite of those changes at the Ministry for regional Development and in spite of complicated situation caused by high number of operational programmes. In other words, she has experience with negotiation in Brussels. The second matter is that she has experience with involvement in the Czech state administration and also in the state executive, as it is known that she was the Minister of Agriculture last year. And such issues like agriculture reform, budgetary reforms in the EU will be one of key issues in 2008-2009. I think that professional background cannot be disregarded in this case. Finally, the third comment – we will have a woman in Brussels. I highlight that she will be one of two women there. Luxembourg has also a woman among permanent representatives. I think it is very interesting step in this respect and I am very delighted and I am looking forward to cooperation during our preparation regarding our presidency. Thank you.

Martin Schmarcz, Head of the Press Unit: I thank the Deputy Prime Minister and now there is time for three questions of yours. The ČTK

Journalist, ČTK: Good afternoon. I would have two questions to the Minister of Finance. Is it true that the integration will start in 2010, ... inarticulate ...

Miroslav Kalousek, Minister of Finance: Do not let us mistake integration of tax and duty administration and the integration of collection of taxes and insurance premium. By 1st January 2010 we will accomplish the project of integration of the tax and duty administration. It is the first step of that integration and then the Ministry of Finance and the Ministry of Labour and Social Affairs and the Ministry of Health will continue in steps aimed at integration of collection of taxes and social insurance. The last phase will include the public health insurance. So, starting from 1st January 2010 only integration of tax and duty administration will take place, which is extremely sophisticated measure including necessary legislative changes.

Martin Schmarcz, Head of the Press Unit: Thank you, the TV Nova.

Journalist, TV Nova: Prime Minister, what do you say to the demonstration which is under way in front of the Office of the Government?

Prime Minister of the Czech Republic, Mirek Topolánek: First of all, I do not know that a demonstration is being held. I am rather busy all the day. If you mean that one, of which I was informed, that about 300 teachers are striking in front of the Office of the Government, I do not understand it, because if they are teachers of elementary or secondary schools, there was not any budget endangered in this case. If they are university teachers, they would be satisfied, as following the agreement with the Ministry of Finance the budget was increased by 1,1 billion crowns. I think that the demonstration in useless and I do not understand it. Nevertheless, I respect their right to demonstrate. They have it.

Martin Schmarcz, Head of the Press Unit: We have two questions here, Právo and the ČT. Then we will have to finish.

Jitka Götzová, Právo daily: What do you say to the fact that the Constitutional Court decided that Mr. Bureš will not perform his function?

Prime Minister of the Czech Republic, Mirek Topolánek: Nothing.

Martin Schmarcz, Head of the Press Unit: Thank you, Česká televize.

Journalist,ČT: Good afternoon. I would like to ask the Minister of Finance – you said that transfers of some millions would take place among the individual ministries.

Miroslav Kalousek, Minister of Finance: It concerns revenues of the individual ministerial headings o the budget. I can give you an example. We agreed today that budgetary means for the support of Romany community integration and Romany coordinators would not administrate the Ministry of Labour and Social Affairs, but they wouldl be administrated by Minister Stehlíková at the Office of the Government. If you want to have an example, I can give you one. 35 million crowns from the heading of the Ministry of Labour and Social Affairs will be transferred to the heading of the Office f the Government. We will adapt the final version of the budget accordingly.

Martin Schmarcz, Head of the Press Unit: Ladies and gentlemen, I thank members of the government; I thank you for your sympathy. Good-bye.