Czech opposition filibusters bill suspending pension indexation

Czech opposition filibusters bill suspending pension indexation
Prime Minister Petr Fiala's five-party centre-right government wants to reduce the increase in the pension bill that would be required if it maintained the indexation of pensions to the country's soaring inflation rate. / bne IntelliNews
By Albin Sybera March 1, 2023

Czech legislators paused their debate on March 1 of a bill suspending the indexation of old-age pensions after a 16-hour marathon session the day before obstructed by two populist opposition parties.

Prime Minister Petr Fiala's five-party centre-right government wants to reduce the increase in the pension bill that would be required by maintaining the indexation of pensions to the country's soaring inflation rate. This is seen as part of its drive to consolidate public finances after the costly government measures to mitigate the effects of the COVID-19 pandemic and the hike in energy prices following Russia's invasion of Ukraine.

An average monthly pension will be increased as of June by CZK 760 (€32.4) instead of by CZK1,770, and the state budget should save CZK19.4bn this year and CZK33bn in 2024.

Opposition parties accuse the government of trying to balance the budget on the backs of the poorest, though they have shied away from detailing the tax rises or other spending cuts that they would choose instead to reduce the budget deficit.

The opposition parties have pledged to obstruct the passing of the bill, leading the ruling coalition to invoke a state of legislative emergency, which allows it to accelerate the legislative scrutiny. The debate on the bill will restart on March 1.

The bill is likely to get eventual approval as the coalition has a comfortable majority of 108 deputies in the chamber of 200, but it is then likely to be referred to the Constitutional Court by the opposition. 

“The longer we persist, the less time there will be for the bill to be approved,” Alena Schillerova, head of the deputies from the populist ANO of controversial billionaire Andrej Babis, told Czech TV.

She added that obstructions will last several days after the ruling coalition agreed to hold night sessions, and tweeted a photo of herself in a sleeping bag in her office.

The far-right and anti-EU SPD party led by another businessman-turned-politician Tomio Okamura joined the obstructions with its 20 deputies. 

The government has said it is ready for a fight.

“We are ready for this, I am ready to be here all this week, ready to be here even on Saturday and Sunday,” Christian Democratic Minister of Labour and Social Affairs Marian Jurecka told Czech TV.

The bill has become a welcome point of contention for ANO, which is recovering from its leader’s defeat in the January presidential race against retired army chief of staff general Petr Pavel, a non-partisan candidate who will be inaugurated on March 8, replacing ANO’s ally at the Prague Castle, Milos Zeman.  

Although ANO was originally set up  as a business-oriented anti-corruption “platform of disenfranchised citizens,” Babis has recently been styling himself as “pro-people” in order to  capture the remaining electorate of the Social Democrats, which fell out of parliament for the first time in Czecha’s history in 2021.

Babis attacked Fiala’s cabinet for forcing “pensioners to pay for [the cabinet’s] incompetence” in an interview with Pravo daily earlier in February, during which he also maintained that his result in the presidential race was a success and suggested that his electoral base from the elections can translate into higher support for his ANO party, which is already the strongest political force in the Chamber with 72 deputies.

For Fiala’s coalition’s “life in the Chamber will be turned into hell” if they lower the indexation of pensions, Babis said, and warned that ANO's obstruction could last out for longer than the 270 days which the then rightwing opposition blocked Babis’ flagship electronic evidence of sales (EET) bill, which he  introduced when in charge of the finance ministry in 2016.

Reform of the pay-as-you-go pension system has long been postponed by the country's politicians, much to the disappointment of free market economists. 

More progressive economists also criticise the current situation and call for more systematic reform.  Public finance economist Filip Pertold pointed out that the current political debate misses the inefficiencies of the current “absurd” pensions system, which “does not cover the growth of expenses of low-income pensioners,” prompts inflationary pressures and keeps in place unsystematic differences in pensions.

“The debate [on these issues] won’t be held, unfortunately, and the [parliamentary] debate will be elsewhere,” Pertold stated on his Facebook profile.

While ANO is attempting to establish itself as the party for the growing electorate impacted by the energy crisis and spiralling costs of living, the centre-right parties of the ruling coalition maintain old-fashioned neoliberal ideas of reducing budget deficits by cost savings while keeping taxes low, ideas which gained a strong footing in the Czech post-communist politics of the 1990s and early 2000s.

Fiala’s coalition comprises the right-wing ODS, TOP 09, centre-right Christian Democrats and centrist Mayors and the liberal Pirate Party, which has only four deputies, however, rendering it too weak to represent a real force on crucial legislative measures.