EC sees state of Czech economy as critical

The European Commission has expressed serious worries about the state of Czech public finances. Although the country's level of indebtedness is not extremely high, the Commission is worried about its rapid growth over the past few years. The Commission has recommended that the Czech Republic systematically work to reduce its public finance deficit, reform its health and pension systems, and reduce risks stemming from claims lodged with the bail-out agency CKA. The Czech Republic should take steps to boost employment and cut social welfare payments. The recommendations are included in the Broad Economic Policy Guidelines, a new form of assessment for the economies of EU members and their convergence. The European Commission is highly concerned about off-budget expenditures and fast-growing spending on social security and health care. The report recommends adopting measures that would encourage the unemployed to seek jobs, and improving labour mobility by deregulating rents and enhancing the transport infrastructure. It draws attention to a number of structural problems on the labour market, such as big differences in unemployment in different regions, an excessive number of long-term unemployed and a high level of unemployed young people. The Commission has also criticised high income taxes and high non-wage costs for employers, which hinder the creation of new jobs and exclude unqualified workers from the labour market. The European Commission's report also calls on the Czech government to improve the business and legal environment and make credit more accessible to small businesses.