Key Challenges

Hurdles to deficit reduction
Czechia’s new, center-right government faces both short-term and long-term challenges. It will find these difficult, if not impossible, to reconcile with its instinctive desire to reduce the budget deficit generated through the COVID-19 pandemic, while also maintaining unity within the coalition government. The pandemic will hopefully prove to be a short-term problem, thanks to vaccinations and other medical advances. However, it has highlighted weaknesses in governance and in social conditions, while leaving unresolved long-standing economic weaknesses. Much of this will require public financial commitments at a time when the public debt level has risen to 42% of GDP. The new government has revised the budget for 2022, but agreed to compromise on a deficit likely to be equivalent to over 5% of GDP. It will hopefully not panic with excessive budget cuts, which would further reduce living standards and harm future investment.
Need for outside
expert voices
The pandemic and the hesitant response to the European Union’s resilience and recovery fund have exposed the weaknesses of mechanisms for consulting independent experts, and for formulating long-term social and economic plans. This partly depends on the approach of the incumbent prime minister, but establishing and using permanent advisory bodies could contribute to better governance and a more serious approach to implementing policies. The Czech Fiscal Council was created in 2017, but is only concerned with the state budget.
Inequity in health
and social systems
The pandemic has exposed weaknesses in the healthcare system, including but not limited to its funding on national and subnational levels. The pandemic affected everybody, but hurt the weakest the most. The social safety net needs urgently upgrading, while ensuring a sustainable pension system will require attention over the medium term. However, reaching the necessary consensus on reforms has so far proven impossible. Another related issue is housing. The absence of a social housing law affects vulnerable groups, including minorities, young families and seniors, the most. There is also a need for greater spending on the educational system, especially regarding digitalization. The state needs to attract and retain top graduates that will replace the aging teacher workforce. It should also consider overcoming issues of social exclusion by providing incentives to top graduates to serve in one of the 606 socially excluded localities. Enabling a harmonious work-life balance and creating a more welcoming atmosphere for immigrants will be essential to effectively address negative demographic trends.
Green transition offers
new opportunities;
better working
conditions needed
for growth
Czechia would benefit from overcoming widespread skepticism about EU initiatives, and playing a more active role in supporting and developing EU policies. The European Union’s resilience and recovery fund offers grants equivalent to around 3% of GDP. The emphasis on green and digital transformations could point to a new economic direction. That would be helped by a determined effort to counter resistance to tackling climate change, as evident in President Zeman’s Christmas broadcast of 2019 when he speculated that higher global temperatures could be the result of a “cosmic” cause. It is surely time for the weight of genuine scientific expertise to be used to counter these kinds of statements. Embracing new technologies implies a shift from low-wage to higher added-value activities, based on domestic innovation as well as the activities of multinational companies. While public spending on R&D did increase for a time, total R&D spending remains below the average EU level. The application of research results in the economic sphere depend 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 depends on attracting and retaining high-skilled personnel with adequate pay levels, reducing the bureaucratic burdens faced by researchers, increasing flexibility, and providing services that support a satisfactory work-life balance. The country continues to rely on immigration for labor in the lowest-income sectors (especially from Ukraine), often with poor conditions and prospects for professional advancement. Attracting highly skilled immigrants as part of an economic transformation depends on creating a conducive environment in terms of pay levels and social service provision.

Party Polarization

Shift toward leader-
driven parties
The Czech party system is polarized, but not between left and right as traditionally understood. In the 2010 parliament, 88% of members of parliament represented political parties with recognizable left- or right-wing ideological positions. Following the 2021 elections, 35.5% of members of parliament could be identified with the right, while none were identified with the left. The shift has been toward new parties that represent the ideas of individual leaders, and views and prejudices within Czech society. One element is a strong distrust toward political leaders in general which provides a base for politicians emphasizing rooting out corruption: they have often proven to be corrupt themselves. Another element is suspicion of foreign influence and diktats from outside, feeding into skepticism toward the European Union and hostility toward immigration.
Former prime minister
is polarizing; protests
drove opposition
parties together
While the traditional polarization between left and right has declined, there has been a strong opposition to the personality of Andrej Babiš, the leader of the populist party ANO (Movement of Dissatisfied Citizens), and the prime minister between 2017 and 2021. Credible accusations that Babiš had engaged in fraud, paired with calls to bring him to trial, hampered the formation of a new government after the 2017 parliamentary elections, and subsequently prompted large-scale protests in the summer and fall of 2019, when 230,000 and 300,000 citizens took part in two demonstrations organized by the citizen initiative Million Moments for Democracy. Even during the heydays of the COVID-19 pandemic, there was little cooperation between the governing coalition and the opposition in parliament (Guasti 2021). Before the parliamentary elections in October 2021, Million Moments for Democracy campaigns pushed the fragmented opposition parties to cooperate. Two coalitions emerged: SPOLU (Together), which united three traditional center-right parties (the Civic Democratic Party, ODS; the Christian Democratic Party, KDU-ČSL; and TOP09); and PaS, which united the ideologically more diffuse STAN (Mayors and Independents) and Pirates. The strong political polarization of the 2021 elections was evident in the almost five percentage point increase in voter turnout compared to the 2017 elections, as well as the fact that the Social Democrats (ČSSD), the junior partner in the Babiš coalition government from 2017 to 2021, and the Communist Party (KSČM), which partially supported the Babiš government, failed to cross the 5% threshold. Both parties had been represented in parliament ever since Czech independence in 1993.
Polarization remains
After the 2021 elections, SPOLU and PaS succeeded in forming a government headed by Petr Fiala (ODS). From the beginning, the government has faced intransigent opposition from ANO, and far-right Freedom and Direct Democracy (SPD). The investiture of the Fiala government in January 2022 took 23.5 hours, as almost every member of parliament of the two opposition parties took the opportunity to make their case against the incoming government in front of TV cameras. This made the investiture the most time-consuming in Czech history, and suggests that the political polarization between the governing coalition and ANO will remain strong. (Score: 4)
Guasti, P. (2021). Democratic Erosion and Democratic Resilience in Central Europe during COVID-19, in: Mezinárodní vztahy 56(4), 91-104.
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