Key Challenges

Low public trust, strong political polarization
Czechia is grappling with a combination of low levels of public trust and high political polarization. Citizens do not trust established political parties, and the membership base of major political parties has shrunk significantly over the past three years. 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 alienates citizens, who see politicians as unresponsive and uncooperative. This coincides with the ongoing need to make decisions with long-term significance in order to address looming challenges related to economic and social development.
Economy vulnerable
to disruptions
Without structural change and innovation, Czechia remains vulnerable to economic downturns and the disruptions caused by new technologies such as automation and artificial intelligence (AI). The long-term sustainability of economic growth remains uncertain, especially given the country’s strong reliance on EU structural funds (for which a significant decline is expected for the 2021 – 2027 period) and the automotive industry as the primary sources of economic growth. Notwithstanding the increase in the minimum wage, a significant share of the country’s low-income workers are unable to lead a dignified life or maintain standard housing. Increasingly, work in the lowest-income sectors is performed by labor migrants (especially from Ukraine). The majority of society mostly ignores their presence. As a response, the country ought to develop an integration environment that focuses on attracting and retaining high-skilled migrants (while seeking to stem the ongoing brain drain to other EU countries).
Domestic innovation
Improving wage levels and social conditions also depends on improving the country’s overall level of economic development. A shift from low-wage to higher added-value activities will depend on the creation of conditions conducive to domestic innovation, and which encourage foreign direct investment in R&D and other higher-wage activities. While public spending on R&D did increase for a time, total R&D spending remains below the average EU level. Moreover, the volume of funding available for applied R&D has not been matched by equivalent expenditures by recipients (domestic firms and foreign investors), and has not produced innovative output. Application of the results of research in the economic sphere also depends on the provision of 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 reduction in the bureaucratic burdens faced by researchers, flexibility, and the provision of services that support a satisfactory work-life balance.
Education tied to
labor-force needs
The country’s educational system needs investment 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, including by retraining people likely to lose their jobs due to technologies such as automation or AI, or due to the fact that multinational firms are relocating to lower-wage countries. Mid-career tertiary-education programs should be made a part of lifelong learning. Access to childhood education and after-school programs should be significantly expanded and made more flexible to enable parents, particularly single mothers, to combine childcare 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 will be essential to address negative demographic trends effectively. Without this change, Czechia’s aging population will pose a challenge for the pension and health systems. An open discussion is needed to reach some degree of consensus on how to finance higher pension spending and higher healthcare costs.
Lukewarm commitment
to environment
The country’s commitment to environmental policies has been lukewarm at best. The scientific consensus on human-induced climate change continues to be disputed by some political figures, including President Zeman. This prevents the adoption of effective policies, especially concerning the now increasingly common droughts. Support for water management, energy efficiency and renewable energy programs ought to be significantly increased to prevent the adverse effects of climate change.
Regional alliances
are limiting
Internationally, Czechia could play a more active role within the EU, NATO and other international organizations, notably on issues of economic integration, global 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 proactive 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 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

Extremely unstable party system; instability makes compromise difficult
The Czech party system is subject to extreme instability. Following the 2017 elections, fully 69% of the new parliament’s members represented parties that had had no representation before 2013. New parties and politicians have emerged in part by exploiting the low level of trust in politicians with longer records. Fragmentation within the parliament increased further in 2019 when a new splinter party, Tricolor (Trikolora), emerged from the Civic Democratic Party bringing the total number of parties with representation to 10. Party instability reflects popular 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 the nepotism and corruption in political life, and for some of the population, by fears generated by the alleged threats posed by immigration and a loss of national sovereignty to the EU. The instability and fragmentation within the Czech party system have made it difficult to reach compromises on solutions to pressing issues. The same is true of the polarization around the personality of Prime Minister Andrej Babiš. Credible accusations that Babiš had engaged in fraud, paired with calls to bring him to trial, hampered the formation of a government after the 2017 parliamentary elections, and subsequently prompted large-scale protests in the summer and fall of 2019, when a respective 230,000 and 300,000 citizens took part in demonstrations organized by the Million Moments for Democracy initiative. However, overall support for the prime minister’s party, ANO, has remained stable at about 30%. This support reflects his control over much of the media, as well as government decisions to increase pensions and the minimum wage, and make public transport nearly free for pensioners and students. The polarization does not prevent policymakers from reaching agreement on some issues. But it does make it more challenging to reach consensus either within the government or across the political spectrum on long-term policy issues that require complex discussion and agreement. (Score: 4)
Guasti, P. (2020): Swerving toward deconsolidation? Democratic Consolidation and Civil Society in the Czech Republic, in: A. Lorenz, H. Formánková (eds), Czech Democracy in Crisis. Cham: Palgrave Macmillan, 29-64.
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