PRAGUE, Dec 10 (Reuters) - The Czech leftist Social
Democrats' push for extra spending in the 2010 budget signalled
a lack of political will to make budget savings if they win an
election next year.
Analysts have said spending-side reforms to the budget
structure are needed to help bring the country's budget deficit,
expected to hit 6.6 percent of economic output this year, to the
European Union's 3 percent ceiling.
The following are five facts on Czech public finances. For a
story on the issue, click on []
* CSSD-BACKED SPENDING
The leftist Social Democrats (CSSD) were able to pass three
amendments in the lower house, including rolling back cuts in
public sector wages and welfare benefits and raising farm
subsidies, which created 12 billion crowns in new spending.
The new spending did not raise the set deficit of 162.7
billion crowns on paper, because the money was reassigned for
other chapters.
But critics including Prime Minister Jan Fischer said the
money would be missing where it was taken from -- including
pensions and healthcare -- and the deficit would rise as a
result.
* MANDATORY SPENDING
Spending stipulated by law has been rising in total but also
as the proportion of the budget.
As a share of revenue, it has risen to an expected 64.5
percent for 2010 from 57 percent in 2000.
Mandatory spending includes more than 30 items, with
pensions taking up more than half of all mandatory payments.
Welfare payments, sick leave, health insurance and debt
servicing are the next biggest items, although none of these
items accounts for more than 10 percent of total spending.
Added to mandatory spending there are items such as public
sector wages and transfers to regional governments, which
further raise the proportion of non-discretionary spending to
about 80 percent of the budget.
* GROWING BORROWING NEEDS AND DEBT COSTS
Without meaningful reforms to budget spending, the Finance
Ministry has forecast the country's gross borrowing need to grow
to around 8.0 percent of gross domestic product in 2012, from
4.9 percent in 2008.
The country's gross borrowing was twice what was planned
this year at 269.3 billion crowns, up from 184.4 billion in
2008. By 2012, the figure should reach 312.9 billion crowns.
Interest payments on the nation's debt will almost double in
that time to 84.5 billion from 47.1 billion expected this year.
* WHERE THE INCOME COMES FROM
More than half of the Czech central state budget's revenue
traditionally comes from the main tax groups: value-added,
excise, corporate and personal income taxes.
Around 35 percent of income comes from social payments by
employees and employers.
The government also expects 107.3 billion crowns in European
Union funds to flow into the central state budget this year,
covering around a tenth of expected revenue. Against this, the
government will pay 35.2 billion to the EU budget.
* FUTURE COSTS
Analysts and officials have talked for years on the need for
reform to the pay-as-you-go pension system for the country of
10.5 million people.
The number of pensioners, including those old-age and
disability payments, stood at 2.8 million as of end-September,
and is expected to rise every year to peak at around 3.9 million
in 2050, with a sharply falling ratio of working population that
supports the pay-as-you-go system.
Past governments had also left dividend payments from state
majority-owned power group CEZ <> for pension reform.
The Social Democrats (CSSD), though, want to use it for an extra
payment of 2,400 crowns to each pensioner.
The state is also expected to award an environmental cleanup
project that has been valued at as much as 115 billion crowns,
which the finance ministry said could show up as a one-off item
on a future budget.
(Reporting by Jason Hovet and Robert Mueller)
