Key Challenges

Low levels of public trust in politics, parties
Czechia grapples with a combination of low levels of public trust and high political polarization. Citizens do not trust established political parties, and they are also quick to distrust new parties that arise with anti-establishment and anti-corruption platforms. On both the left and the right, established political parties are increasingly facing two kinds of anti-establishment challengers – populist and pro-democratic. The fragmentation along multiple dividing lines in the parliament undermines the ability to reach a broader policy consensus. The competition between political blocs creates the impression that “a permanent election campaign” is underway, impairs politicians’ ability to reach fact-driven policy decisions, and further antagonizes citizens, who see politicians as unresponsive and uncooperative. This coincides with the need to make decisions with long-term significance in order to face challenges for economic and social development.
Vulnerable to future economic shifts
Without structural change and innovation, Czechia remains vulnerable to economic downturns, automation and AI. The long-term sustainability of economic growth remains problematic, especially with the strong reliance on EU structural funds and the automotive industry as the primary sources of economic growth. The persistence of lower wages means that a large part of low-income workers are unable to lead a dignified life and maintain standard housing. Wage growth, in particular in the low-income sectors, can be helped notably by government decisions to increase minimum wage levels.
Shift to high-wage economy still underway
Improved wages and social conditions depend also on improving the level of economic development. A shift from low-wage to higher added-value activities depends on creating conditions that are conducive to domestic innovation and which encourage foreign direct investment in R&D and other higher-wage activities. While public spending in R&D did increase for a time, total R&D spending remains below the average EU level. Moreover, the volume of funding for applied R&D is neither reflected in matching efforts of the recipients (domestic firms and foreign investors) nor met with innovative output. Application of the results of research in the economic sphere also depends on support to innovative enterprises, which are currently poorly developed and to a great extent reliant on EU funding. Creating a strong research and innovation base also depends on attracting and retaining high-skilled personnel with adequate pay levels, a minimalization of the bureaucratic burdens faced by researchers, flexibility, and the provision of services that support a satisfactory work-life balance.
Education system requires investment
The country’s educational system needs investment in order to attract and retain top graduates that will replace the aging population of teachers. The Czech educational system needs to be more forward-looking and significantly increase resources for the development of a highly skilled labor force. It should also increase resources for lifelong learning, that is, the retraining of those likely to lose their job due to automation, AI or the fact that multinational firms are relocating to lower-wage countries. Mid-career tertiary education programs should be part of lifelong learning. Access to childhood education and afterschool programs should be significantly expanded and made more flexible in order to enable parents, particularly single mothers, to combine child care and work and thus avoid being pushed into a reliance on welfare benefits.
Demographic trends
pose challenges
Enabling a harmonious work-life balance and creating a more welcoming atmosphere for immigrants is important in order to effectively address negative demographic trends. Without this change, Czechia’s aging population will pose a challenge for the pension and health systems. Attempts by previous governments to increase fees and the reliance on private providers have failed to win public trust. An open discussion is needed to reach some degree of consensus on how to finance higher pension spending, raise the pension age and cover higher health care costs .
More active international role possible
Internationally, Czechia could play a more active role within the EU, NATO and other international organizations, notably on issues of economic integration, international financial stability, measures to counter climate change and humanitarian help to refugees and other victims of conflicts. Within the EU, Czechia needs to be even more pro-active in fostering multipolar coalitions and look beyond regional alliances. Regarding defense, the country ought to be more active within NATO. It must also increase its cyber-defense capabilities in order to prevent current and future foreign inference. Military spending should focus not only on weapon purchases but also on developing cyber-defense capabilities. Synergetic effects between applied R&D, ICT and defense ought to be significantly strengthened.

Party Polarization

Polarization leads
to suspicion of
dominant party
In Czechia, the party system is subject to extreme instability. This makes it difficult to reach compromise on solutions to pressing issues and thus serves as a major barrier to constructive engagement among politicians in the country. Since 2017, this dynamic has culminated in a form of polarization that has made it practically impossible to form a government without the dominant party being regarded with suspicion by most everyone across the political spectrum. The 2017 parliamentary elections led to a parliament in which 69% of its members represented parties that had had no representation before 2013. New parties and politicians have emerged while exploiting the low level of trust in politicians with longer records. This development reflects concerns over a wide range of issues, including the failure to establish an inclusive political system and perceived failures to improve social conditions for pensioners and many others who face unrepayable personal debts. Most specifically, distrust is engendered by a sense of disgust for nepotism and corruption in political life and, for some of the population, by fears that are generated by alleged threats of immigration and a loss of sovereignty to the EU.
Prime minister is highly polarizing figure
Polarization is most marked around the personality of Prime Minister Babiš and credible accusations that he should be put on trial for fraud. These accusations hampered the formation of a government after the 2017 parliamentary elections. Eventually, a coalition could be formed in July 2018 with participation from the Social Democrats – who hoped to further their social agenda – and passive support from the Communist party. The former, however, remain very much junior partners as they are aware that Babiš could switch and rely on support from the far-right Freedom and Direct Democracy (Svoboda a prima demokracie, SPD).
Consensus difficult on long-term policy issues
This instability of the party-political system does not prevent policymakers from reaching agreement on some issues – there is broad opposition to accepting EU immigration policies – but it does make it more difficult to reach a consensus both within the government and across the political spectrum on long-term policy issues that require complex discussion and agreement. The result of the 2018 municipal elections in the capital Prague indicated again the instability of party politics. Neither the Communists nor the Social Democrats crossed the threshold for any representation. The Movement of Dissatisfied Citizens (ANO) finished fifth, having previously occupied the position of mayor, and a new municipal government was formed between the Pirate party and new political subjects rooted in civil society. (Score: 4)
Guasti, P. (2018). Swerving toward deconsolidation? in: A. Lorenz, H. Formánková (Hrsg.), Das politische System Tschechiens. Wiesbaden: Springer VS, 39-62.
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