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Tuesday, January 18, 2022

Czech government slows or freezes salary hikes to cut budget gap

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PRAGUE – The new Czech centre-right government will freeze the pay of state workers and reduce previously announced pay hikes for others as it seeks to cut the budget gap amid a spike in inflation, ministers said on Wednesday.

The government, appointed earlier this month, has pledged to cut the 2022 central government deficit below 300 billion crowns ($13.66 billion), versus 380 billion envisaged by the previous cabinet.

“We are freezing pay for state administrative workers … and for ourselves,” Labour and Social Affairs Minister Marian Jurecka told a news conference.

“We found a compromise so that key professions in the front line such as social services and healthcare, teachers, people in the army, will still get some increase.”

The cut is a signal of the intention to make savings but is just a fraction of the overall savings ambition, with the freeze cutting central government spending by about 4.7 billion crowns versus previous plans.

Teachers will get a 2% pay hike and health and social services workers exposed to the coronavirus pandemic will get a 6% hike. Military personnel and policemen will get a 700-crown monthly pay increase.

The government will also prepare a law to freeze the salaries of politicians for next year.

Inflation has soared to 6% in November and is expected to rise to around 8% in early 2022 as a jump in energy prices combines with supply chain disruptions and a tight labour market.

Jurecka said the government agreed to expand aid programmes to help households hardest hit by the energy price hikes.

The country will start 2022 on a provisional budget, and the cabinet plans to prepare its new draft in the first quarter.

The Finance Ministry last forecast in November a 2022 public sector deficit of 4.4% of gross domestic product.

($1 = 21.9620 Czech crowns)

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