10.6092/issn.1561-8048/15672
The Czech position vis-à-vis the NGEU plan prioritised the maximisation of grants for domestic investments while ensuring autonomy in their targeting. The National Resilience and Recovery Plan prioritises the investment side at the expense of structural reforms. The direction of investments resembles the priorities pursued in the context of cohesion policy, while meeting climate and digital targets. Most of the investments are in infrastructure projects. The biggest shortcoming of the Czech plan is the absence of a vision of how to take advantage of the economic potential of the green transition and digitalisation.
application/pdf
1561-8048
15672
1S
en
Jan Bittner
https://creativecommons.org/licenses/by/4.0
Italian Labour Law e-Journal
Social policy
National Recovery and Resilience Plan: Czechia
Text.Serial.Journal
https://illej.unibo.it/
15
National Reports
2022-11-03
2022-10-27
2022-11-03
2022-11-03
ILLeJ
Jan Bittner
2022/11/03
10.6092/issn.1561-8048/15672
Prague University of Economics and Business
1561-8048
1S
Social policy
en
National Recovery and Resilience Plan: Czechia
https://illej.unibo.it/article/download/15672/14863
15
    National Recovery and Resilience Plan:                                        Italian Labour Law e-Journal
    Czechia                                                                      Special Issue 1, Vol. 15 (2022)
    Jan Bittner                                  The NextGeneration EU in Action: Impact on Social and Labour
    jan.bittner@vse.cz                                                                                  Policies
                                                                                               ISSN 1561-8048
                                                                https://doi.org/10.6092/issn.1561-8048/15672




          National Recovery and Resilience Plan: Czechia
                          Jan Bittner

                                                 Abstract

      The Czech position vis-à-vis the NGEU plan prioritised the maximisation of grants for domestic
      investments while ensuring autonomy in their targeting. The National Resilience and Recovery
      Plan prioritises the investment side at the expense of structural reforms. The direction of
      investments resembles the priorities pursued in the context of cohesion policy, while meeting
      climate and digital targets. Most of the investments are in infrastructure projects. The biggest
      shortcoming of the Czech plan is the absence of a vision of how to take advantage of the
      economic potential of the green transition and digitalization.

      Keywords: NGEU, Czechia, Resilience and Recovery Plan, Labour policy, Social policy




1. Czechia and NGEU: Pragmatism in the Shadow of Conflict of Interest.

   During the first year of the Covid-19 crisis, Czechia was in rather favourable situation.
Subsequently, the negotiations on the NextGenerationEU recovery plan (NGEU) began in
the context of a stable macroeconomic situation at the peak of the economic cycle, with a
consistently low unemployment rate and one of the lowest debt levels in the European
Union. Initial financial constraints did not seem to threaten economic development,
especially in 2020, when the pandemic did not spread with the same intensity in Czechia as
in other countries.
   Therefore, the Czech government's position vis-à-vis EU action was reticent from the
beginning, as it was not seeking external assistance. On the other hand, Czechia was not in
categorical opposition to joint European action. Former prime minister Andrej Babiš
summarised the Czech position overall in three sentences on his Twitter account: “I definitely
do not want to obstruct the agreement. I just want to win the maximum for the Czech Republic. We need


  PhD researcher at Department of Managerial Economics, Faculty of Business Administration, Prague
University of Economics and Business, Prague, Czech Republic; W. Churchill Sq. 1938/4; 130 67; Prague 3 –
Žižkov; Czech Republic

                                                                                                               1
    Jan Bittner                                                                Italian Labour Law e-Journal
                                                                              Special Issue 1, Vol. 15 (2022)
                                                                The NextGeneration EU in Action: Impact on
                                                                                  Social and Labour Policies




that money to invest”.1 Instead of a principled position for or against a major step in European
integration, the Czech government focused on negotiating the most benefits from the new
facility. The two negotiating priorities concerned the mechanism for allocating funds
between the Member States and the thematic conditions. In other words, the Czech
negotiators focused on maximising the contributions from the new facility and minimising
the influence of European institutions over their use.
    The effort to maximise possible financial contributions was aimed at increasing the share
of grants in the distribution of NGEU grants and loans. As the European Member State with
the lowest unemployment rate, Czechia also criticised the methodology for calculating the
allocation of grants, opposing the inclusion of the unemployment rate in the calculation key.
The criticism was based on the fact that the reference period 2015–2019 of course came
before the Covid-19 crisis and therefore it should not be used in relation to framing NGEU
as a post-pandemic recovery tool. Czechia also opposed using GDP as an indicator of a
country's economic level. A significant part of GDP (6 per cent in 2019 and 4.3 per cent in
the Covid-hit 2020) is the income of foreign owners, which flows out of the economy, not
contributing to the disposable income of the Czech population. Czechia logically prefers
gross national income (GNI) as an indicator, adjusted for the balance of foreign income.2
The Czech position towards subsidy drawdowns favoured flexibility for Member States as
regards channelling funds and decision-making freedom. This priority was enforced only in
relation to the European Structural and Investment Funds (ESIF) in the multiannual
financial framework from 2021 to 2027, negotiated in parallel with NGEU. Given the
uncertainty of economic developments in the following seven years, the flexibility of
transferring contributions between the individual Structural Funds within the ESIF increased
by a quarter.
    The NGEU negotiations and the subsequent elaboration of a national recovery and
resilience plan were also overshadowed by the Czech Prime Minister’s conflict of interests.
He owns the agrochemical and mass media conglomerate holding Agrofert via a trust fund.
It is a major recipient of European agricultural subsidies and controls a large, influential
media house. As a result of the Czech Republic’s protracted dispute with the European
Commission and its April 2021 audit results, which confirmed violations of EU conflict of
interest law, the plan eventually had to include provisions on the control and possible
correction of national rules for determining the real owners of companies in accordance with
European standards. This has thus been introduced as a condition for drawing money from
the European Union's Recovery and Resilience Instrument. This is one reason why the new
government has already submitted a draft amendment to the Act on the Registration of
Beneficial Owners, approval of which could enable access to funds.


1 Babiš A., Já rozhodně nechci bránit dohodě, Twitter, 2020:
https://twitter.com/AndrejBabis/status/1281550014276304896
2 GDP measures total production within national borders, while GNI measures what is produced by nationals.

The difference between GDP and GNI thus includes net foreign income (compensation of employees, property
income or taxes less subsidies on production).


https://doi.org/10.6092/issn.1561-8048/15672                                                                2
    Jan Bittner                                                                   Italian Labour Law e-Journal
                                                                                 Special Issue 1, Vol. 15 (2022)
                                                                   The NextGeneration EU in Action: Impact on
                                                                                     Social and Labour Policies




2. The Recovery and Resilience Plan Overview.

2.1. We don’t need no loans.

   The former government, composed of two parties – ANO (part of the Renew Europe
group in the European Parliament) and ČSSD (part of the S&D group in the European
Parliament) – agreed on the national recovery and resilience plan (RRP) on 17 May 2021 and
submitted it to the European Commission on 1 June 2021. After the Commission’s approval
on 19 July 2021, the Council adopted the final plan on 8 September 2021. The total requested
amount of EUR 7.036 billion corresponded to almost the maximum financial contribution
(EUR 7.07 billion). It was clear from the beginning that Czechia would not use any loans.
The reason was its good starting fiscal position, with low indebtedness and cheap lending in
financial markets.
   The situation in 2022 has changed markedly. In October 2021, the parliamentary election
sent ANO into opposition and ČSSD even outside the Chamber of Deputies altogether. The
new government now has to cope with Russia’s invasion of Ukraine, with its associated
defence spending, Ukrainian refugee inflows and the social impact of high inflation. The
budgetary situation has also deteriorated due to the unprecedented tax cuts at the end of
2020 passed by ANO and former opposition but currently the main government party ODS
(part of the European Conservatives and Reformists group in the European Parliament).
Worsening debt has even led to the risk of a downgrade in Fitch Ratings,3 which would have
repercussions for the cost of borrowing in the financial markets. Combined with interest
rates rises by the Czech National Bank, the ten-year government bond yield tripled in a single
year. Therefore, the new ODS-led government is considering changing the original position
and, in addition to revising some components of the RRP, is also considering reassessing the
loan component of NGEU.4 The Czech government also faces the problem of additional
budgetary demands related to the reforms and investments indicated in the RRP, which the
inherited plan did not provide for. It suffices to note that higher expenditure on the
reimbursement of VAT and subsidies in the construction sector were estimated by the
Ministry of Industry and Trade as likely to lead to EUR 1.2 billion in additional costs.5


2.2. Direction of reforms and investments.

  Recovery after the Covid crisis was intended to be pursued in a ‘build back better’ spirit,
combining the solution to Czech social problems and abandoning the dysfunctional growth

3   ČTK, Česku hrozí zhoršení ratingu, agentura Fitch mu zhoršila výhled hodnocení, 2022,
https://www.ceskenoviny.cz/zpravy/cesku-hrozi-zhorseni-ratingu-agentura-fitch-mu-zhorsila-vyhled-
hodnoceni/2202824.
4 iRozhlas, Česko dostane dalších zhruba 14 miliard korun skrze Národní plán obnovy, oznámil ministr Bek, 2022,

https://www.irozhlas.cz/ekonomika/narodni-plan-obnovy-penize-cesko-eu-mikulas-bek_2205131000_ako.
5 E15.cz., Vláda se pře o financování Národního plánu obnovy, 2022, https://www.e15.cz/domaci/vlada-se-pre-o-

financovani-narodniho-planu-obnovy-stanjura-vyckava-na-aktualizaci-z-bruselu-1389030.

https://doi.org/10.6092/issn.1561-8048/15672                                                                   3
    Jan Bittner                                                                         Italian Labour Law e-Journal
                                                                                       Special Issue 1, Vol. 15 (2022)
                                                                         The NextGeneration EU in Action: Impact on
                                                                                           Social and Labour Policies




model of the Czech economy based on foreign investment and cheap domestic labour. The
RRP could have been an opportunity for Czechia to nudge towards disruptive change to free
itself from this middle-income trap. However, the government officials missed the boat
because of their reluctance to take advantage of the current massive structural changes –
digitalisation and green transition – and fundamentally change the functioning of the Czech
economy. In addition, Czechia lacks an economic strategy that would guide development
and serve as a compass for government reform and investment. The RRP is being
implemented without this vision, covering many policy areas without a clear goal.6
    Reforms and investments worth EUR 7 billion are divided into six pillars, listed below,
and broken down into 26 separate components. The plan contains 122 measures divided
between 85 investment plans and 37 reforms. The most significant part, 47 per cent of the
total allocation, belongs to the pillar combining infrastructure construction and green
transition. According to the European Commission’s assessment, green transition alone
accounts for 41.6 per cent of the Czech plan, covering energy efficiency in buildings,
installing renewable energy sources or low-emission mobility. The Commission's guidelines
on the drafting and submission of the RRP have also motivated the Member States to
prioritise the digital transformation. The Digital transformation pillar represents 16 per cent,
but digital projects are also present in other pillars, constituting 22.1 per cent of all funds.
These are mainly investments in digital infrastructure, education and digitalisation of public
administration.7

   Table 1 Six pillars of the RRP (only those financed from the Recovery and Resilience
Facility)
    Pillars of components                          Costs      (million    Share     in
                                                 EUR)                  total
    Digital transformation                          1 093                 16%
    Physical infrastructure and green transition    3 285                 47%
    Education and labour market                     1 594                 23%
    Institutions, regulation and business           254                   4%
 support
    Research, development and innovation            322                   5%
    Health and resilience of population             488                   7%

      Source: (European Commission, 2021).

  The Czech RRP also reflected the government’s reluctance to abide by EU climate policy.
The interim versions discussed at the working level with the European Commission were

6 Czech TV, Plán obnovy lepí díry v rozpočtu, chybí mu strategie a cíle, míní ekonomka Švihlíková, ČT24 - Česká televize,
2021:
https://ct24.ceskatelevize.cz/ekonomika/3315503-plan-obnovy-lepi-diry-v-rozpoctu-chybi-mu-strategie-a-
cile-mini-ekonomka.
7-European    Commission, Laying the foundations for recovery: Czechia, Publications Office, 2021
https://data.europa.eu/doi/10.2775/470117.

https://doi.org/10.6092/issn.1561-8048/15672                                                                           4
    Jan Bittner                                                                Italian Labour Law e-Journal
                                                                              Special Issue 1, Vol. 15 (2022)
                                                                The NextGeneration EU in Action: Impact on
                                                                                  Social and Labour Policies




repeatedly returned for revision precisely because of the insufficient climate-related
investments. For example, Czechia had to give up its ambition to finance roads and
motorways. Environmental NGOs criticised even the final version of the plan. According to
them, the approach to climate transition is still inadequate. For instance, the existing New
Green Savings Programme (Nová zelená úsporám) is a successful subsidy scheme for the
replacement of old boilers financed from revenues from emission allowances. The RRP
represents merely a change in the source of finances, with funding now from NGEU grants
as a climate-related policy, without bringing any added value (iRozhlas, 2021).8 In general,
the plan cannot meet the goal of initiating structural change towards a low-emission
economy.


2.3 All quiet on the labour market front.

    The labour and social dimension of the RRP is rather limited, inasmuch as it only
addresses the following issues: employment services infrastructure, early childhood and
social care facilities, employment conditions in the cultural sector or education in the digital
age. The labour market is directly targeted by component 3.3 Modernisation of employment services
and labour market development with EUR 886 million within the Education and labour market pillar.
    In consideration of the fact that Czechia has the lowest unemployment rate in the EU,
unemployment is not perceived as an acute problem. It has not changed with the Covid
crisis, during which the kurzarbeit-like9 employment programme ‘Antivirus’ channelled more
than EUR 2 billion in employment support to one-third of employees in the private sector.
    Thanks to this programme, the unemployment rate in mid-2021 was still below 3 per
cent.10 This is probably one of the reasons why the overall RRP allocation for employment
and labour market measures is relatively low.
    Low unemployment in the long term inevitably results in a lack of government attention
towards employment policies. Consequently, Czech active labour market policy expenditure
is among the lowest in the EU. Total expenditure on employment policy (in the comparable
year 2019) amounted to only 0.47 per cent of GDP. The only RRP component devoted to
labour market policies is aimed at supporting lifelong learning by creating educational
infrastructure, such as creating modern education and training centres, a database of training
courses, including legislation aimed at improving the qualifications system.
    The gender and employment gaps are substantially above the EU average and represent
a long-standing problem of the Czech labour market. One of the reasons is the deplorable
unavailability of early childhood care. In 2020, only 4.8 per cent of children under the age of


8
   iRozhlas. (2021). Zelenější, ale pořád ne dost zelený. Unie může český plán obnovy znovu vrátit, 2021
https://www.irozhlas.cz/zpravy-domov/narodni-plan-obnovy-klima_2106090600_jab.
9 Originally a German short-time working scheme used during recessions, when the state compensates working

hours reductions as a way of preventing unemployment.
10 MoLSA CZ., Analýza programu Antivirus: A, A+, B., MPSV ČR., 2021:

https://www.mpsv.cz/documents/20142/2061970/Anal%C3%BDza+Antiviru.pdf/.

https://doi.org/10.6092/issn.1561-8048/15672                                                                5
     Jan Bittner                                                                 Italian Labour Law e-Journal
                                                                                Special Issue 1, Vol. 15 (2022)
                                                                  The NextGeneration EU in Action: Impact on
                                                                                    Social and Labour Policies




three attended formal childcare compared with the EU average of 32.3 per cent.11 The RRP
addresses this shortcoming by allocating investments to childcare facilities supporting
mothers' return to the labour market. In pursuing this objective, the RRP outlines both
reform and investments. The reform consists of financial stabilisation of childcare facilities
for children under the age of three. The reconstruction of existing and the construction of
new childcare facilities should increase their number by 40 per cent.
    An important aspect in the social domain addressed by the RRP is the integration of
health and social long-term care while ensuring a stable system of adequate financing for
long-term services. Czechia, being one of the fastest ageing societies, needs to prepare its
whole long-term care services ecosystem for demographic change. The RRP also addresses
the permanent problem with the emergence of socially excluded localities (areas with high
concentrations of poverty, material deprivation, reduced access to public services or job
opportunities and so on) by allocating funds to social care prevention and consultancy.
    Finally, employment and social protection are also addressed in different components
across the RRP. Education and research on the socio-economic impact of digital
transformation fall under the digitalisation tag. In response to the severe impact of restrictive
Covid-related measures on the cultural and creative sectors, Czechia has committed to
adopting an artists’ statute, which should improve working conditions in this atypical
profession and facilitate investment in skills development with direct support to 2000 people
in the cultural and creative sector. Lastly, 7 per cent of the grants are supposed to be directed
to the health system.


3. The Social and Labour Dimensions in the Recovery and Resilience Plans.

    The Commission has provided a positive evaluation of the Czech RRP, with minor
reservations. According to the Commission’s report, the plan responds to the most
significant challenges of the Czech economy and society, such as demographic ageing,
climate change and digital transformation. The plan is deemed to focus on a broad spectrum
of investments in transport, energy, construction, digitalisation, childcare and social
infrastructure, and health care. These investments are noted as being complemented by
reform efforts toward more efficient public administration, competitiveness and cohesion.
    The Commission evaluated the plan as meeting the thematic criteria for the costs of the
green transition and the digital transformation. The Commission had certain reservations on
whether the government has provided for sufficient measures to prevent, detect and correct
conflicts of interest. Czechia had to add a milestone on harmonising domestic and European
standards in assessing the ownership of companies. Minor reservations concerned the
technical evaluation of smaller investment projects as insufficient. A more important
criticism concerns the lack of synergies between investment and structural reforms, which


11Eurostat, Living conditions in Europe—Childcare arrangements, 2022 https://ec.europa.eu/eurostat/statistics-
explained/index.php?title=Living_conditions_in_Europe_-_childcare_arrangements.

https://doi.org/10.6092/issn.1561-8048/15672                                                                  6
 Jan Bittner                                                            Italian Labour Law e-Journal
                                                                       Special Issue 1, Vol. 15 (2022)
                                                         The NextGeneration EU in Action: Impact on
                                                                           Social and Labour Policies




prevents the plan from reaching its maximum transformative potential. According to the
report, the whole reform part of the RRP also lags behind the investments, supporting the
argument that the plan is seen only as an additional source of funds.
   According to the European Commission (n.d.) estimates, NGEU may bring up to 18,000
new jobs to the Czech Republic by 2026, directly increasing GDP by 0.8–1.2 per cent and
another 0.3 per cent because of cross-border spillover effects. To sum up, Czechia wishes to
use the Recovery and Resilience Facility (RRF) primarily to finance investments that largely
resemble those that constitute the focus of cohesion funds. Because of the combination of
time pressure to create the Recovery and Resilience Plan and realise the planned investments,
together with the lack of economic strategy, the government has approached the NGEU
plan only as a source of additional funds, considering the reform part, as well as the climate
and digitalisation objectives as necessary evils. Nevertheless, the Commission assessed that
the Czech Republic had succeeded in meeting both the thematic criteria and the link with
reform efforts.


4. The European Pillar of Social Rights and the Social Scoreboard.

   Assessed in relation to the Social Scoreboard Czechia is among the countries with a good
balance on most indicators, including early leavers from education and training, share of
NEETs, income inequality, employment rate, (long-term) unemployment rate, the
cumulative increase in real gross disposable income, poverty and social inclusion indicators.
   Nevertheless, there are areas in which Czechia has to catch up. In general, these concern
equality between women and men and the issue of equality in opportunities and education.
   The high gender employment gap (at 15.4 per cent versus the EU average of 10.8 per
cent) and one of the highest gender pay gaps (at 16.4 per cent versus 13 per cent in the EU)
point to high inequalities in the labour market, which are linked to the usual suspects, such
as discrimination and prejudice, cultural customs in child care (carried out predominantly by
women and unpaid household work), personal income taxes that are disadvantageous for
second earners, and – most importantly in the context of investment opportunities – the
terrible state of pre-school care. The RRP can partially improve incapacity shortages
estimated at up to 36,700 places for very young children, reducing the disadvantages afflicting
carers in the labour market. The strengthening of care services for the elderly and other
disadvantaged people can have the same effect by relieving women in the so-called ‘sandwich
generation’, squeezed in between caring for their children and parents.
   In its assessment, the Commission discusses the risk of poverty and social exclusion,
concentrated in specific groups of the population, such as Roma, single women or the elderly
(especially women living alone). Investments in social infrastructure in this direction are
planned. The problems of limited social mobility concern regional disparities in education,
because the socio-economic background significantly impacts educational attainment.




https://doi.org/10.6092/issn.1561-8048/15672                                                         7
     Jan Bittner                                                                   Italian Labour Law e-Journal
                                                                                  Special Issue 1, Vol. 15 (2022)
                                                                    The NextGeneration EU in Action: Impact on
                                                                                      Social and Labour Policies




   Educational failures are more substantial in regions affected by high levels of asset
forfeitures and housing deprivation of families with children.12 Moreover, this problem has
probably been exacerbated by the extended lockdown in schools.13
   Unfortunately, the RRP responds only marginally with investments in modernising
education and reducing the digital divide.


4.1 Country-specific recommendations.

   In the 2019 CSRs preceding the negotiations,14 the Council recommended that Czechia
focus on the long-term sustainability of pension and health care systems, namely public
systems directly affected by demographic ageing. By 2070, the ratio of two seniors per person
of working age will squeeze the pension system. In order to satisfy the higher demand, the
health care system should increase its funding by 1.1 percentage points of GDP over the
same time horizon. Despite the efforts of the Ministry of Labour and Social Affairs to fund
the initial costs of a proposed thorough pension reform, it did not end up in the plan. In this
area, only the reform of long-term-care legislation – part of the RRP – tackles the
implications of demographic change. This reform integrates social and health care and
ensures stable funding for services, including community and home care.
   The second recommendation relates to the already discussed situation of women with
children and other disadvantaged groups – people with low qualifications or disabilities – in
the labour market. According to the Council recommendation, the main determinants of
gender inequality in the labour market include the inadequate supply of affordable childcare,
extended parental leave, low use of part-time contracts and the lack of long-term care
facilities. The capacities of childcare and long-term care facilities are considered in the RRP,
including the development of advisory services and investments in inventory. Long parental
leave is a Czech specificity compensating for the lack of kindergarten places. The RRP,
however, does not tackle the low availability of part-time jobs. The recommendation also
includes the issue of inclusion in education, support for digital skills and for the teaching
profession. The education segment is taken into account in the third pillar, which includes
strengthening IT education and teachers’ digital skills, investing in digital technologies at
schools, supporting disadvantaged schools and tutoring pupils in response to the lengthy
Covid lockdowns.
   Finally, the Council recommends investing in sustainable transport, digital infrastructure
and the transition to a low-carbon economy. As already mentioned, the RRP is very
investment-based and takes these pillars into account, both through digitalisation and the


12 PAQ Research, Mapa vzdělávacího ne/úspěchu, 2021, https://www.mapavzdelavani.cz/.
13 PAQ Research, Pandemie žákům výsledkově vzala v průměru 3 měsíce učení, PAQ Research, 5th October 2021,
https://www.paqresearch.cz/post/pandemie-dopad-zaci.
14 European Commission, Recommendation for a Councin Recommendation on the 2019 National Reform Programme of the

Czech Republic and delivering a Council opinion on the 2019 Convergence Programme of the Czech Republic, 2019
https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1560258059685&uri=CELEX%3A52019DC0503 .

https://doi.org/10.6092/issn.1561-8048/15672                                                                    8
     Jan Bittner                                                                       Italian Labour Law e-Journal
                                                                                      Special Issue 1, Vol. 15 (2022)
                                                                        The NextGeneration EU in Action: Impact on
                                                                                          Social and Labour Policies




development of railway infrastructure and electric vehicles, and through reforms and
investments in connection with digitalisation and green transition. The recommendation also
focuses on effective public administration and the development of digital state services. The
RRP response can be found in the first pillar and its reforms of access to public data and e-
health, investment in digital state services, development of open data, digital justice,
cybersecurity and 5G networks, including the whole ecosystem of 5G networks from
technical infrastructure to scientific research activities.
   Some of the 2019 recommendations are repeated in the 2020 CSRs. Nonetheless, in 2020,
the Council's recommendations were affected by the pandemic.15 It resulted in a proposal to
address the pandemic and the associated social, economic and fiscal problems.
   Accompanying recommendations on ensuring the resilience of the health care system,
strengthening health care staff, and access to primary care and electronic health care are
partially taken into account in the RRP. The plan includes developing a health education
system and the digitalisation of health care. Still, instead of the resilience of the health care
system and its availability, the plan focuses on establishing specific specialised centres, such
as oncology or cardiovascular and transplant medicine. Especially the National Oncology
Institute, a flagship project of the former prime minister, has received a lot of criticism from
the expert community. Even the Czech Oncology Society criticised the project of
centralisation of oncology care, one of the effects of which is to drain the top oncologists
from hospitals in the regions.16 The 2020 CSRs also included recommendations on
developing education, training and digital skills and a focus on investments in the digital and
low-carbon economy. Given the exceptional European semester cycle without structural
reforms recommendations in the 2021, the Commission assessment of the Czech RRP
focused on fiscal sustainability while maintaining investments primarily in green
transformation and digitalisation in line with the plan and the state's capacity to provide
health and social care (European Commission, 2021).17


5. Lessons from the previous crisis.

   Czechia has not been presented with macroeconomic recommendations within the
framework of the in-depth reviews carried out by the Commission since the Covid-19
pandemic.


15 European Commission, Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform
Programme of Czechia and delivering a Council opinion on the 2020 Convergence Programme of Czechia, 2020
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52020DC0503.
16 Czech TV, Stát chystá vznik národního onkologického institutu. Odborná veřejnost preferuje regionální centra, ČT24 -

Česká televise, 2021:
https://ct24.ceskatelevize.cz/domaci/3342170-stat-chysta-vznik-narodniho-onkologickeho-institutu-
odborna-verejnost-preferuje.
17 European Commission, Recommendation for a COUNCIL RECOMMENDATION on the 2021 National Reform

Programme of Czechia and delivering a Council opinion on the 2020 Convergence Programme of Czechia, 2021
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52021SC0211&qid=1632757011940.

https://doi.org/10.6092/issn.1561-8048/15672                                                                         9
 Jan Bittner                                                             Italian Labour Law e-Journal
                                                                        Special Issue 1, Vol. 15 (2022)
                                                          The NextGeneration EU in Action: Impact on
                                                                            Social and Labour Policies




    The 2022 Country-Specific Recommendations consider mainly fiscal sustainability and
the new risks related to the geopolitical situation and high inflationary environment. After
the period of rapid growth of the general government deficit caused by non-temporary and
non-targeted measures – such as the massive personal tax cut in 2021, discussed below – the
plan is to reverse the trend in an effort to bring the deficit back down below 3 per cent by
2024. One driver here is supposed to be economic growth and a much slower pace of
government expenditure growth (for example, as regards employees’ wages or social
transfers). Given the already high structural deficit and long-term trends such as demographic
ageing, however, the government budget faces sustainability risks in the medium and long
terms. The fiscal position will inevitably be tight. The 2022 CSRs recommend focusing on
public finance sustainability and supporting the most vulnerable households and firms facing
the energy price hikes, as well as support for Ukrainian refugees. There is also the emerging
topic of housing affordability, which is among the lowest in the EU. The CSRs state that
housing policy in Czechia is non-existent and that social housing stock is meagre (0.4 per
cent in contrast to a 7–8 per cent EU average). This housing crisis is exacerbated by the need
for housing for Ukrainian refugees. The Council thus recommends strengthening the
provision of social and affordable housing, while adopting legislation for social housing and
housing policy coordination. The CSRs also mention the energy crisis and the need to reduce
reliance on fossil fuels by investing in renewables and energy efficiency. All of those
challenges require fiscal capacity. Otherwise, the likelihood is that austerity measures will be
imposed or that the problems will not be tackled at all. In both cases there may be negative
social and political consequences.


6. The Politics of the NGEU Plan.

    The negotiations on and adoption of the NGEU plan have not attracted much attention
among the general public, although it can be considered an important milestone in European
integration. The pandemic and consequent government measures have completely
dominated the public debate and stand at the heart of political disputation between
government and opposition. Disputes over NGEU, or later the drafting of the RRP, caused
friction within the coalition between the two government partners, the dominant ANO
(Renew Europe group) and the minority ČSSD (S&D group). The Ministry of Industry and
Trade, headed by an ANO minister, was responsible for the preparation (and also
implementation) of the RRP, in cooperation with the Ministry of Finance and the Office of
the Government, also under the leadership of ANO nominees. The main financial package
was intended to be channelled towards the green transition, complemented by health
investments. The relevant ministries were also led by the same party, including the Ministry
of Regional Development, which manages the ESIF funds. Minor coalition partner the
ČSSD was initially overlooked, and its priorities – especially in the area of employment, social
affairs, culture and a greater emphasis on green transition – were only gradually added to the
plan. Despite the omission of the ČSSD's request to finance pension reform and the cutting

https://doi.org/10.6092/issn.1561-8048/15672                                                         10
     Jan Bittner                                                                       Italian Labour Law e-Journal
                                                                                      Special Issue 1, Vol. 15 (2022)
                                                                        The NextGeneration EU in Action: Impact on
                                                                                          Social and Labour Policies




of some cultural projects, the government reached a consensus on 17 May 2021. The
subsequent elections in October 2021, leading to a change of government, were little related
to the RRP.


6.1 All quiet on the labour market front.

   The involvement of the social partners and civic society in creating the RRP was limited;
their role was not significant. The initial approach stemmed from the tight schedule; rapid
elaboration of the Recovery and Resilience Plans, combined with the need to draw down
investment contributions relatively quickly created a time pressure. The process followed a
‘bottom-up’ approach, with many projects across ministries. Only the projects with
guaranteed implementation within five years were incorporated into the investment package,
which was then grouped into individual pillars and components. The absence of a vision and
internal logic for the RRP is already clear from this process outline. The social partners and
civil society began to be involved only on the basis of a rough form of the plan. The RRP
was discussed at the tripartite level several times, and round tables were held with NGOs
and other partners in November and December 2021. However, those consultations
continued to be characterised by non-transparency and confusion.18 Interest groups regularly
complained about poor communications with the ministry, and the current version of the
RRP was not available at meetings and round tables. Instead of fundamental content changes,
the social partners were eventually granted a position in the Committee of the RRP, which
will be in charge of implementing the plan.


6.2 Time for austerity measures? Not yet.

   Czechia has always been fiscally conservative, with low debt and an aversion to high
deficits. The government dealt with the Great Recession (2008 financial crisis), for example,
with a series of austerity measures. This caused a further recession and a slow economic
recovery. The perception of tough austerity measures has changed, but the fiscal
conservatism lasted until the Covid-19 crisis. Fiscal tightness changed during the pandemic
with relatively generous compensation programmes. The long-term sustainability of public
finances was distorted mainly because of tax reforms from the end of 2020. In an ad hoc
coalition with the then opposition parties, ANO approved a tax reform that cut personal
income tax by more than half and abolished the real estate acquisition tax. The subsequent
reduction in tax revenues to the level of developing countries was not accompanied by a
decrease in government spending. The general government debt in Czechia experienced the

18ČŽL, Otevřený dopis: Neziskové organizace upozorňují na netransparentní přípravy Národního plánu obnovy, Česká ženská
lobby, 2021:
https://czlobby.cz/cs/zpravy/otevreny-dopisneziskove-organizace-upozornuji-na-netransparentni-pripravy-
narodniho-planu.

https://doi.org/10.6092/issn.1561-8048/15672                                                                        11
     Jan Bittner                                                                   Italian Labour Law e-Journal
                                                                                  Special Issue 1, Vol. 15 (2022)
                                                                    The NextGeneration EU in Action: Impact on
                                                                                      Social and Labour Policies




fastest increase in the EU between 2020 and 2021,19 and the structural deficit requires
significant budgetary measures.
    In the October election campaign, the consolidation of public finances was discussed, but
none of the parties entering the Chamber of Deputies proposed addressing the situation by
raising taxes. The new government's consolidation strategy was based on savings in the state
administration, so its first steps were to freeze the already approved wage rises of civil
servants and reduce the wage rises of teachers and health workers and reduce public health
spending on public health system. The continuation of this austerity-like consolidation
strategy, which would require more substantial cuts in the provision of public services to
effectively cover the structural deficit, was interrupted by the Ukraine crisis and the need to
address the social impact of high inflation.



7. Final considerations: the RRP and the new growth model.

    The Czech approach to social and labour protection policies is generally lukewarm, and
the RRP covers them only marginally. In addition, the abovementioned personal income tax
reform, approved during the last phase of RRP drafting, favoured high-income employees
(one-fifth of top-ranking employees received 36 per cent of total tax relief, while one-fifth
of the poorest received only 4 per cent (Kalíšková & Šoltés, 2022))20 while substantially
reducing the state's capacity to solve current and future problems. Unfortunately, the RRP is
not a magic wand that can correct the errors of the past. The total RRP allocation covers
only two years of the permanent tax relief for high-income employees. The government’s
capacity to deal with current and future changes in the labour market, social protection needs
or active industrial policy, thereby promoting the convergence of the Czech economy with
its western neighbours, is poor.
    The financial incentives to implement some reforms, such as the financing of long-term
care or early childhood care, seem to be working. Still, social and labour legislation requires
more profound changes and more intense involvement of the national budget, providing
long-term financing. The risk is that the costs of the government’s lack of interest in
employment policies will reveal themselves only when it is too late. The reform priorities
included in the RRP show that the Czech government is only skirting around the most
pressing issues on the social and labour policy agenda.
    The Czech RRP was also considered to be an opportunity to speed up wage convergence
with the western European Member States and finally to break through the developmental
ceiling of the middle-income-trap economy. The ideal opportunity provided by the
emergence of new value chains in the green and digital economies could shift the position


19 ÚNRR, Vývoj státního dluhu České republiky, 2022 https://unrr.cz/studie-vyvoj-statniho-dluhu-ceske-republiky.
20   Kalíšková K., Šoltés M., Dopady zrušení superhrubé mzdy, 2022 https://idea.cerge-
ei.cz/files/IDEA_Studie_4_2022_Dopady_zruseni_superhrube_mzdy/IDEA_Studie_4_2022_Dopady_zrus
eni_superhrube_mzdy.html#p=8.

https://doi.org/10.6092/issn.1561-8048/15672                                                                   12
     Jan Bittner                                                              Italian Labour Law e-Journal
                                                                             Special Issue 1, Vol. 15 (2022)
                                                               The NextGeneration EU in Action: Impact on
                                                                                 Social and Labour Policies




of the Czech economy within established production chains. Although the EU’s capital- and
technology-abundant economic core has a better starting position because competitive
advantage tends to go to countries with pre-existing competencies,21 the RRP could enable
Czechia at least to keep up with the climate and digital transformations.
    Unfortunately, the country is using the recovery funds to fill existing holes in the budget
rather than as incentives for qualitative change, thus losing valuable time and resources in
the effort to cope with disruption in the global economy. The RRP can be a positive impulse
to help Czechia invest in modernisation, implement structural reforms, start making
transformative changes in the world of work and take the social implications of the climate
crisis seriously. However, it has neither the imagination nor the ambition to instigate
qualitative socio-economic change.



Copyright © 2022 Jan Bittner. This article is released under a Creative Commons Attribution
4.0 International License




21 Grieveson R., Bykova A., Hanzl-Weissová D., Hunya G., Korpar N., Podkaminer L., Stehrer R., Stöllinger
R., Nový růstový model pro země střední Evropy, Friedrich-Ebert-Stiftung, 2021 http://library.fes.de/pdf-
files/bueros/prag/18317-20211026.pdf.

https://doi.org/10.6092/issn.1561-8048/15672                                                              13
