Transcript Czech Republic

The Czech Republic
By: Mary Hamilton
Economics of the European Union
April 17, 2008
Fast Facts
• National name: Ceska Republika
• President: Václav Klaus (2003)
• Prime Minister: Mirek Topolánek (2006)
• Total area: 30,450 sq mi
• Capital and largest city:
– Prague, 1,378,700
• Language: Czech
Map of the Czech Republic
Country History
• Czechoslovakia was founded in 1918 after the
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collapse of the Habsburg Empire.
A communist regime was installed in 1948, and
it lasted until the 1989 "Velvet Revolution".
The first free election was held in June 1990
On Jan. 1, 1993, the Czechoslovakian federation
was dissolved and two separate independent
countries were established—the Czech Republic
and Slovakia.
Country History Continued
• The Czech Republic joined NATO (North Atlantic
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Treaty Organization) in March 1999.
President Václav Havel left office in Feb. 2003,
after 13 years as president.
In March, Václav Klaus became the Czech
Republic's second president
In May 2004, the Czech Republic joined the EU.
After an inconclusive election in June 2006, the
political deadlock was broken in August, with
rightist Mirek Topolánek appointed prime
minister.
Economic Summary
• GDP/PPP (2007 est.): $249 billion;
• GDP per capita: $22,000 (2005 est.)
• GDP by sector: agriculture (3.4%),
industry (39.3%), services (57.3%) (2004)
• Real growth rate: 5.7%.
• Inflation: 2.6%.
• Unemployment: 6.6%.
• Labor force: 5.31 million; agriculture
4.1%, industry 37.6%, services 58.3%
(2003 est.).
Labor Income Taxation
• The Czech income tax rate for individual's
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income in 2008 is flat, a 15% rate.
In 2007 tax on the income of individuals was
payable at rates of 12% - 32%.
UN Gini: 25.4
– Most European nations tend to have Gini coefficients
between 24 and 36
– United States' and Mexico's Gini coefficient are both
above 40, indicating that the United States and
Mexico have greater inequality.
Past Employment Protection
• International research carried out in 2004
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positioned the Czech Republic in the top half of
those OECD countries with lower overall
employment protection, that is, with a higher
ENF (External Numerical Flexibility) value.
Czech EPI level: 1.9 (2004)
Denmark (model country for flexicurity) EPI
level: 1.8
Total EPI in selection of OECD
countries, 2003 (scale of 0–6)
• Note: EPI ranges from 0, representing maximum flexibility, to 6, constituting the
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maximum extent of employment regulation.
Source: OECD Employment Outlook 2004
Current Employment Protection
• Changes in employment regulation in
recent years have moved the Czech
Republic towards those countries with a
higher rate of employment protection.
• EPI level: 2.1 (2007)
• This development is primarily the result of
offering increased protection in relation to
temporary forms of employment .
Czech Republic Social Security
• The system of social security made up of
three tiers:
– State Social Subsidy
– Social Assistance
– Social Insurance**
The State Social Subsidy
• Consists of different benefits and allowances:
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– child care allowances
– birth grants
– death grants
Administered at regional level by local bodies of
the state administration
All permanent or long-term residents of the
Czech Republic are entitled to State social
subsidy benefits, of which entitlement to child
allowances, social benefit, transport and
housing benefits are means tested.
The Social Assistance Program
• Complementary social safety net type of system
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targeted principally towards persons in need,
along with charities and other non-state
institutions.
All permanent or long-term residents of the
Czech Republic are entitled to social
assistance when their other forms of income do
not suffice in ensuring an adequate level of
living.
Administered at regional level by local bodies of
the state administration.
Social Insurance
• Protects against the risks of loss of income due
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to old age, short-term illness, invalidity,
unemployment and death of a breadwinner,
covering all workers.
Supervised by Ministry of Labour and Social
Affairs
Contributions to the social insurance scheme are
set as a percentage of the gross salary for the
period concerned:
– 25% paid by employee
– 75% paid by employer
Heath Insurance
• The Health Insurance System is compulsory and
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is targeted at all persons who permanently
reside in the Czech Republic.
The financing of the health care scheme is
entrusted to semi-public administrative bodies.
Citizens decide the health insurance body with
which they would like to be insured.
– Largest proportion of citizens is insured by the
General Health Insurance Company.
Strengths of the Social System
• A universal-type of social security system is
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characterized by considerable equality of incomes and
relatively generous benefits to a society.
The insurance system encompasses security mechanisms
against the risk of loss of income due to loss of
employment, old age, illness, invalidity, unemployment
and death of a spouse.
A higher level of co-operation with the EU means better
conditions for growth, which could in turn be favorable
to the social security systems.
Social security expenditure as a proportion of the state
budget as well as a proportion of the GDP is likely to
rise.
Obstacles for the Social System
• The share of social security expenditure as a proportion
of GDP in the Czech Republic oscillates around 20%,
which is lower than the EU average by approximately
6%.
– Comparable with the EU countries with less comprehensive
social security systems (Ireland, Spain, Portugal, Greece).
• It will be increasingly difficult to maintain the real level
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of individual benefits.
Socio-demographic trends increasingly put pressure on
the social security system making it hard to maintain the
existing level of social protection.
Main Reforms of the Welfare
System
• The government's falling popularity ratings mean
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that any proposals for radical reform are likely to
meet with increasingly strong resistance within
the ruling coalition.
In March the lower house of parliament
approved the draft law on pension reform in its
first reading.
The government has approved changes to the
law on pension insurance, allowing it to raise
pensions again in 2008.
Source List
• "Country Briefings: the Czech Republic." Economist. 10 Apr. 2008.
Economic Intellegence Unit. 17 Apr. 2008 <ecomomist.com>.
• "Heathcare System." Czech Republic: the Official Website of the
Czech Republic. Ministry of Foreign Affairs of the Czech Republic. 17
Apr. 2008 <http://www.czech.cz/en/czech-republic/health-andhealth-care/healthcare-system/>.
• MÁcha, Martin. "Social Security System in the Czech Republic."
Socialsecurity.Fgov. 17 Apr. 2008
<http://socialsecurity.fgov.be/bib/frames/engels/btsz_01_2001_mac
ha.htm>.
• "The Czech Republic." The CIA World Factbook. 15 Apr. 2008. The
Central Intelligence Agency. 17 Apr. 2008
<https://www.cia.gov/library/publications/the-worldfactbook/geos/ez.html>.