Spend now, starve later

The complications in creating a ČSSD-Coalition cabinet have mainly centered around the budget deficit. The Coalition (esp. US-DEU) wanted the Vladimír Špidla cabinet to commit to a public-sector deficit in 2006 of 3% of GDP, and the failure to push this through was the main reason Hana Marvanová gave for resigning last Thur. as US chairwoman. Marvanová said the public-sector deficit is currently 8.9% (about Kč 200bn). ČSSD is expecting a deficit next year of around Kč 150bn, but a much higher figure must realistically be assumed given ČSSD's spending plans and its past history. Ivan Pilip, who is now US's acting leader, alluded last week in Lidové noviny to the possibility of two years of big spending by Špidla's cabinet followed by emergency austerity measures. The belt-tightening would come at about the time of EU accession.