Government Unveils Austerity Measures, Pension Reforms

Leaders of Czechia's ruling coalition are currently discussing the details of a fiscal consolidation package and pension system reforms during a special press conference, which started at five to twelve o'clock (an idiom meaning "the eleventh hour").

• Finance Minister Zbynek Stanjura said that the austerity measures will reduce budget deficit by CZK94bn in FY2024 and by CZK147bn the following year. This means that the government exceeded its initial goal of cutting the fiscal gap by CZK70bn in FY2024 but savings are smaller than the CZK120bn figure floated in the media yesterday.
• The bulk of savings (70%) will be made by cutting expenditure, chiefly reducing non-investment state subsidies for companies to the tune of CZK55bn over the next two years and trimming spending on on state operations and salaries by CZK21bn.
• The government will introduce the expected changes to the tax structure. Three VAT rates will be replaced by two rates (12% and 21%), while the corporate tax rate will rise to 21%. Czechia will also ditch 22 various tax exemptions.
• Retirement age will be set so that people spend 21.5 years in retirement on average, automatic pension indexation will be slowed, while rules on early retirement will become stricter.
• Click here to follow the press conference live.