Press conference of the Prime Minister of the CR, Mirek Topolánek after the meeting with regional chief executives at Lichtenstein Palace on 23.2.2007

Martin Schmarcz, head of the press unit of the Office of the Government: Good afternoon, ladies and gentlemen, welcome to the press conference after the meeting of the Prime Minister and the Minister of Finance with regional chief executives, and now I give the floor directly to the Prime Minister Mirek Topolánek, who will briefly inform you on the agenda. You have the floor, please.

Mirek Topolánek, Prime Minister of the CR: Thank you. I assumed the right to moderate this meeting, because the key meeting was the meeting of chief executives of fourteen regions with the Minister of Finance and his deputy. And the main issue, except of many other perhaps a bit less important, was the cooperation in the course of creation of the new system of tax revenue allocation. The result is, except of large discussion, establishment of certain working group in which, together with representatives of the Union of Town and Municipalities, with whom we have not negotiated so far, works will start quickly as it is February and it is necessary to start working on the new system of tax revenue allocation and on potential legislative steps related to this issue as early as now. The second issue, which was of the same degree of importance, concerned regional operational programmes and co-financing. I will leave assessment and conclusions to my colleagues, whether it will be the Minister of Finance or the chief executive of regional authority Evžen Tošenovský. The third point was a debate on a more complicated issue, which concerned agreement on cooperation in the sphere of methodology and assessment of existing projects, so called PPP – Public Private Partnership – cooperation between the private and public sector. If this government is to have ambitions to stop increase of the state debt and public budget debts, then it should have also these hidden debts under control. And we were talking about ways and attitudes of municipalities, regions and the state to the implementation of cooperation of the private and public sector, but there were just opinions of a preparatory character. The other issues were of lees importance and I let my colleagues to inform you on details, if necessary. Thank you.

Martin Schmarcz, head of the press unit of the Office of the Government: I will ask the Prime Minister what the order will be like, but as the first one it will be probably the chief executive of the Moravia-Silesian region Mr. Tošenovský, as he is taller.

Evžen Tošenovský, Chairman of the Association of Regions and the chief executive of Moravia-Silesia region. This is the reason why I am given the floor. I would like to thank the Prime Minister for inviting all of us, now I am speaking on behalf of all the chief executive of regional authorities, that he invited us to this meeting, because the debate with the government now, when we are starting to discuss rather philosophy, how to solve the system of tax revenue allocation, is very important. And this year it is closely connected with the debate on use and the start, real start of using European funds, where the situation is very strange in comparison with last years, as the state does not act as a single channel as far as the EU is concerned, but every NUTS, in other words that statistical unit, i.e. regions, negotiate with Brussels individually or together. And there is need of close cooperation and coordination with government representatives and especially with the Ministry of Finance and the Ministry for Regional Development so that to manage this complicated operation. From the point of view of the system of tax revenue allocation, we really agreed on the fact that it was just start of debates; not only an amendment to the Act on the System of Tax Revenue Allocation should occur so that only mandatory expenditures covered either by the state or by regions would be transferred. That would be insignificant objective. But we also want to implement such amendments and philosophy, so that we would approach a routine when the state finances what is its duty and so that it would have a tool to control to a certain extent regional finances. Thus we would draw near to need of reality, so that regions would have an financial instrument, which is realistic and which is possible to enforce by the government in the Parliament, because it is not just our agreement, but certain issues will have to be approved on the level of the Parliament. From the point of view of the PPP projects, projects of Public Private Partnership, the debate is rather complicated, as the government has no tools for regulation or restriction on the regional or local level. It is a serious argument so that to avoid great financial problems, which the Czech state is facing. Therefore, I would like to thank once more for this opportunity of nearly two-hour debate with the Prime Minister and with the Minister of Finance in starting preparations for very complicated amendments to the Act on the System of Tax Revenue Allocation. And preparation of using European funds is really one of the most complicated one, which we are facing. Thank you.

Martin Schmarcz, head of the press unit of the Office of the Government: Now the Minister of Finance Miroslav Kalousek, without whom it would not be possible, has the floor.

Miroslav Kalousek, Minister of Finance: Thank you. It is for the first time when with my 190 centimetres I am the smallest one at a press conference. I think that previous speakers, the Prime Minister and the chief executive of a regional authority Tošenovský have mentioned most issues. It is up to me to thank for the opportunity to meet chief executive of regional authorities, to appreciate this meeting as a working and purposeful one. Strictly speaking, budgets are linked and I love saying that they must breathe together. Therefore relatively close cooperation of the Ministry of Finance with regional councils and regional authorities is necessary. I very appreciate rational working atmosphere of the meeting. I appreciate the fact that regional authorities realize actual situation of state finances, that we have collective will to implement really effective reform of public budgets, that we are aware of responsibility for the most effective use of means from structural funds of the EU as possible and that we agreed on establishing some working groups. I firmly hope that the cooperation will operate for the general benefit. I thank once more for this.

Martin Schmarcz, head of the press unit of the Office of the Government: Now the Prime Minister wants to add something to what has already been said.

Mirek Topolánek, Prime Minister of the CR: I have forgotten something as usual. I think that we are always looking forward. It is evident that the cooperation is just a start, but I decided, after an agreement with chief executives of regions and they accepted it, that I would present to them and I would bring with me also further ministers of my government, especially those who may have special influence on regional activities. Whether it will be the Minister of Education Kuchtová or the Minister of Transport Řebříček, of course regions have their tasks, their roads, their transport service abilities, or it will be Minister of Environment Bursík. We would like to debate gradually certain issues in detail, which had not been debated in the past or which we newly face.

Martin Schmarcz, head of the press unit of the Office of the Government: Ladies and gentlemen, now there is time for your questions. I just remind you to wait for the microphone before you start speaking. The TV Prima, please.

Martin Erva, TV Prima: I would like to ask the Prime Minister if he could describe the atmosphere of the meeting, if he could say what it was like.

Mirek Topolánek, Prime Minister of the CR: I think that Miroslav Kalousek has already said it. In previous times it was said that the meeting took place in friendly atmosphere. Well we did not have any serious, ideological disputes, because regional representatives are not in disputes, I would say political dispute with existing government coalition from the point of view of political party composition. Nevertheless, the levels of regional and central management are different and controversial, certain disputes occur and it is up to us, up to both sides the governmental and executive one to communicate, to reach a consensus, to reach something, which will be useful for people who live here. In this sense the meeting was very constructive and I have not expected anything else.

Martin Schmarcz, head of the press unit of the Office of the Government: Further question, please.

Evžen Tošenovský, Chairman of the Association of Regions and the chief executive of Moravia-Silesia region. If I may to add something, I would like to thank for the very constructive debate and I can just say on behalf of my colleagues, regional chief executives – regional chief executives were always very constructive, but they are also very critical and they must be because of the essence of the matter. So, what the Prime Minister has said, the relation of the government with regions will have to be discussed. We always regard it as essential and it concerns only the degree of a contact, whether it is stronger or not. Our principles are the same and therefore I can say that it was really held in a friendly atmosphere.

Martin Schmarcz, head of the press unit of the Office of the Government: I can just say that I was behind the corner and I did not hear any raised voices, any disputes. Further question the TV prima, please.

Martin Erva, TV Prima: I would ask about one more issue. I was talking to several regional chief executives in the morning and some of them were speaking, for example regarding issues of transport infrastructure and using of money from the EU, about pre-financing of these projects, so that regions would not have to run into debt. I would like to ask the Minister of Finance, whether they were promised some concrete obligations and whether he promised them some money for pre-financing of those transport actions.

Miroslav Kalousek, Minister of Finance: I think that we were talking more about the system than about concrete amounts. But there was mentioned a concrete amount concerning regional operational programmes, when the state will have responsibility in next years for half of post financing, which is a burden of regional authorities. If I am to use concrete figures – 85% is negotiated participation of the EU, 15% rest for national resources and the state budget will finance half of it. We also agreed on the fact that it will not be half of every action, but that the half will be allocated to the regional budget and it will depend upon decision of the regional councils, which project will be supported more and which will be supported less. We agreed that it is better to strengthen this subsidiary responsibility than to administer it from the centre.

Martin Schmarcz, head of the press unit of the Office of the Government: Further question, please. The TV Prima again.

Martin Erva, TV Prima: I apologize, I have one more question. Concerning the PPP projects, perhaps the most important one is the motorway to South Bohemia. I would like to ask whether you have found a concrete solution, which would enable to continue in its construction.

Mirek Topolánek, Prime Minister of the CR: You estimated well, of course, that it was one of issues. It was a partial issue with regard to the character of further issues debated. We agreed with the regional chief executive Zahradník on very urgent meeting with the Minister of Finance and the Minister of Transport and we want, of course not only to meet promises of previous governments, but we want to solve the problem for the benefit of citizens of South Bohemia Region, because the PPP Project would rest only as a promise without concrete solution and realization, which is expected by the region, would not be possible.

Martin Schmarcz, head of the press unit of the Office of the Government: Further question, please. The ČTK:

Martin Cimrman, ČTK: Good afternoon. There was a statement of the Union of towns and Municipalities this week that they mind the fact that little money flows in their budget and that they would want higher share for example in consumption taxes. Do the regional chief executives agree with this and will proposals concerning the Act System of Tax Revenue Allocation be aimed at this direction? Thank you.

Mirek Topolánek, Prime Minister of the CR: I am not going to be as one politician who preceded me, who said that it was bad question as it evokes conflict between regions and municipalities. I think that further negotiation on the level of the government and the Ministry of Finances will be that with the Union of Towns and Municipalities, which we will want to invite to the cooperation in creation of philosophy and creation of concrete tools of the system of tax revenue allocation. The philosophy is to cancel those sudden changes in towns´ financing, to cancel those strange races of towns, which win citizens over their side, which exhort citizens to move to their towns; this is a problem, which we want to solve. So, those sudden and sometime very strange financing of towns according to number of inhabitants will be changed. It is a long-term task to increase share of towns in taxes that have origin in a town or in a community in question. It is just one of issues, which we want to solve with towns and communities. I do not dare to estimate, whether enough money flows to towns and communities, as it is true what Miroslav Kalousek have said that budgets, whether they are municipal, regional or state, breathe together. It is not possible to separate them and when you look at the state financing and the debt, which we have inherited, you can expect our answer concerning possibility of further increase of this debt.

Martin Schmarcz, head of the press unit of the Office of the Government: Further question, please. The ČTK again.

Martin Cimrman, ČTK: I would ask for completion and need some of regional chief executives. Thank you.

Evžen Tošenovský, Chairman of the Association of Regions and the chief executive of Moravia-Silesia region. I just add information. We are really at the start. Simple statement that there is little money in budgets is valid for every budget. I do not know any budget in the world, which would show that there is enough money in it. We must say this even if we would not like to say it. But on the other hand, I do not want to disrespect opinions of mayors that they have little money; the debate is much more complicated. I am convinced that a cloven hoof is hidden there - what duties the state, the government or the Parliament will impose on municipalities, and this are serious problems about which we started to talk; whether it is ensured sufficiently - that is a great complication. Then it is a question of the extent of individual revenue and issues, about which a community itself decides. And then it is a question what duties must municipalities meet, because the state may decid to assign a task to supervise over environment and therefore administrative burden is increasing and I could continue. The state may decide that a matter must be implemented, that there is necessary to install touch-free mixture taps in schools, municipalities must to fulfil it somehow. In such a case a mayor is right; we were talking about it, we concluded that such measures should not be taken by the state, government or Parliament. In case they decide like this, expenditures should be partly covered. Therefore I quite agree with the opinion of mayors, but a debate will have to be led, so that in case somebody with higher legislative power burdens a municipality, he would have to be aware of the fact that he burden lower budgets by his decision. And the fact is that we have not ten thousands budgets we have the only one state budget and from this budget means are allocated to municipal and regional budgets according to certain rules. So, somebody has financial means reduced, somebody added and the role of the government and the Parliament is how to impose those duties and rules and to what extent the individual degrees will decide without necessity to ask higher body. Therefore the answer to your question is very complicated.

Mirek Topolánek, Prime Minister of the CR: I will try to add something to it. There are two ways here; the first one in increasing of municipal budgets, which is limited by the central budget. The second way is reduction of the routine work. I think that it is the right way. If certain amount of work is transferred to towns and communities, to towns of third type or to regions, then it is further way and it is discovering whether transferred work was not reduced on the central level; it is not always like this. You can either reduce their work or, on the other hand, you can allocate money to them corresponding to work reduced on the central level. I think it is quite logical and I understand worries of mayors absolutely because the work that must be done especially by municipalities of the third type has increased recently and it is covered not only by money that is earmarked for state administration but also by money which municipalities have for their own decisions and for municipalities´ development.

Martin Schmarcz, head of the press unit of the Office of the Government: I ask my colleagues from the ČTK and then the TV Prima again.

Jan Šindelář, ČTK: I would like to ask the Minister of Finance – the Union of Transport estimated the amount for transport infrastructure for the following seven years at the about 100 billion crowns annually. Do you regard this amount as a realistic one?

Miroslav Kalousek, Minister of Finance: I think that it is quite logical and rightful that this amount has been estimated by a professional association, which depends on it to a certain extent. 100 billion crowns annually for infrastructure financing exceed concrete possibilities of the state budget. We will try, of course, to finance the transport infrastructure at a maximum speed, but there is also a question whether there will be a will to change mandatory expenditures. Money for infrastructure, money for education, money for number of further development activities are not available; in case of your concrete question, money for transport infrastructure are not included in the budgetary heading of the Ministry of Transport or that of the Fund of Transport Infrastructure, but they are in the heading of the Ministry of Labour and Social Affairs, in the system of public health insurance and in a number of further packets of mandatory expenditures. The crown is just one; you will spend it or you will invest it in your future. There is either one possibility or the other. You cannot use both alternatives. In the framework of the reform of public budgets it is necessary to find adequate extent of means, which will be spent and the extent of means, which will be invested in the future, I also mean in the transport infrastructure.

Martin Schmarcz, head of the press unit of the Office of the Government: The TV Prima, please.

Martin Erva, TV Prima: I have one more question and I promise it is the last one, just to complete the problem. I would like to ask the minister whether, apart from co-financing, you will lend regions money, so that they could pay the rest amount and they would return the money to you later on. Some of regional chief executives, who I was talking to, said he would strive for it.

Miroslav Kalousek, Minister of Finance: Mr. Erva, I am very glad that he told it only to you, not to me. If you want to lend them money, then it is your free will. We do not have any agreement concluded. Our obligation to cover half of part that is to be co-financed is valid.

Jan Šindelář, ČTK: Just to complete information; have regional chief executives learnt how much money would be earmarked for the State Fund of Transport Infrastructure and how much money would you provide for those motorways? You were talking about general principles; do you have an idea of a concrete amount?

Miroslav Kalousek, Minister of Finance: We did not debate it, but I suppose that the budget of the State Fund of Transport Infrastructure for 2007 is quite clear, i.e. figures are clear there. As to the budgets for 2008 and 2009, wait for medium-term outlook, please. It has a connection with the problem I had been talking about. We will either spent it or invest it; it is not a question primarily for the government, it is above all a question for the Chamber of Deputies, because it will vote about laws, which will decide whether we will spend it or invest it in the future.

Martin Schmarcz, head of the press unit of the Office of the Government: The time reserved for the press conference is nearly expired. Are there any further questions? The last question – Lidové noviny.

Journalist, Lidové noviny: I would like to ask the regional chief executive whether it is possible to compare that dialogue, which is now led with the government with the dialogue or cooperation with the previous government, the social democratic one?

Evžen Tošenovský, Chairman of the Association of Regions and the chief executive of Moravia-Silesia region. I would not dare to make a comparison. It was the first meeting. Of course, it is always simpler debate with those who have similar ideological basis. On the other hand, ask me after half a year.

Martin Schmarcz, head of the press unit of the Office of the Government: Ladies and gentlemen, thank you for your attention.