Wednesday

4th May 2016

Czech government backs EU fiscal pact

  • Prague: The Czech government of Bohuslav Sobotka seems intent on thawing relations with Brussels (Photo: Moyan_Brenn)

The Czech government has agreed to adopt the EU's fiscal pact, as the new centre-left administration of Prime Minister Bohuslav Sobotka continues to tread a more pro-EU path than his predecessors.

The decision, taken following a cabinet meeting in Prague on Monday (24 March), will now need approval by the Czech parliament. The move will leave the UK as the only EU country not to have signed up to the treaty.

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The pact, which was driven forward by German Chancellor Angela Merkel and former French president Nikolas Sarkozy, and backed by EU leaders in December 2011, commits countries to putting the bloc's limits on budget deficit and debt levels of 3 percent and 60 percent of GDP, respectively, into national constitutions.

It also requires countries to keep their budgets in balance or surplus with a structural deficit no higher than 0.5 percent of economic output.

The pact's supporters believe that it is necessary to demonstrate the bloc's commitment to debt reduction, while critics say that it will severely restrict the flexibility of governments to put in place economic stimulus measures during times of recession.

"With this decision, we return to the mainstream of European integration. It is an important step which naturally is on the path to the future adoption of the common European currency," Sobotka told reporters.

"It will serve as a preparation for the eventual adoption of the euro," he added.

The Czech Republic has no official timeline for joining the single currency, but Sobotka has suggested 2020 as a possible date.

Sobotka's government is intent on building warmer relations between Brussels and Prague following years of tension between the EU institutions and Vaclav Klaus, the country's former president and a veteran eurosceptic.

The new Social Democrat-led government was sworn into office at the end of January, bringing an end to a seven month power vacuum in the country caused by the collapse of the centre-right government last June.

EU recovery to slow this year

On just 1.8 percent growth, the commission's forecast is less optimistic than before because of an instable global economy and lack of results of EU reforms.

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