Bloomberg News

Czech Deficit-Cutting Laws Taken to Court by Opposition Party

January 06, 2012

Jan. 5 (Bloomberg) -- The Czech Social Democrats, the country’s largest opposition party, filed a complaint at the Constitutional Court against several government laws aimed at cutting the budget deficit.

The Social Democrats said Prime Minister Petr Necas’ majority coalition restrained the party’s right to properly debate the legislation when it pushed through a package of bills in parliament in November. The laws included measures to boost private savings for retirement and raise the value-added tax on some goods and services.

“We are proposing to abolish these 14 so-called reform laws,” Social Democrats Chairman Bohuslav Sobotka said in a statement in Prague today.

The laws approved last year are part of Necas’ plan to narrow the public-finance deficit to less than the European Union limit of 3 percent of economic output by 2013. The plan, which included cuts in spending on public wages and a reduction of state subsidies, has helped the Czech koruna and government bonds outperform their Polish and Hungarian peers in 2011.

Lawmakers on Nov. 6 overrode a veto by the upper house, controlled by the Social Democrats, to increase the lower value- added tax rate on goods and services including food, drugs and public transportation to 14 percent this year from 10 percent. The Finance Ministry estimates the VAT change to boost budget revenue by 21.3 billion koruna ($1.1 billion) in 2012.

--Editors: Alan Crosby, Hellmuth Tromm

To contact the reporters on this story: Peter Laca in Prague at placa@bloomberg.net;

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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