Czech social partners fail to agree on 2020 budget framework

Social partners failed to agree on the 2020 budget framework and a new meeting has been scheduled for Sep 16, according to an official announcement. Both employers and trade unions had issues with the budget, but expectedly different ones. Employers would tolerate the CZK40bn budget deficit target only if the money was spent on innovation and infrastructure. Therefore, employers believe that teachers’ wages should increase by 15%, rather than the envisaged 10%, and that infrastructure spending should increase. They argued that with current level of financing, a proper national highway network won’t be completed by 2030.

Meanwhile, unions demanded higher wage growth for all public sector employees, not only teachers. They also support a 15% wage hike for teachers, but also a 10% for non-teaching staff working at schools, as well as 8% for everyone else in the public sector. Unions seem to have stepped back from its insistence that most of the increase should go to tariff wages and now offer that half of the hike should be to tariff wages and the rest – to performance compensation. Unions also want more spending on transport infrastructure, arguing that with that rate, road construction projects will be underfinanced by at least CZK11-13bn by 2030.

We remind that under the current framework, the budget deficit should be CZK40bn, with teachers wages planned to increase by 10%, while everyone else’s – by 2%. The government doesn’t appear willing to give up its targets, as the finance ministry has strongly argued that economic growth is expected to remain lower, at 2.4% in 2020, which wouldn’t allow higher spending. We are skeptical that positions will near, but social partners do not legally need to approve the budget bill. Yet, it will make talks on public sector wage levels more difficult, and the government’s version will likely be the one to stay.

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