Final Word from Wednesday, February 12, 2003
The record 10.2% unemployment rate last month is compounding the problem of public finances. People out of work not only receive welfare but also contribute less in taxes and continue to accrue pension credit. Tax receipts fall as unemployment rises, but welfare payments increase and pensioners require the same payments. Labor Minister Zdeněk Škromach wants to attack the problem by tightening the conditions for getting welfare, but changing this is a long process. Borrowing more money to fill the gap is the simpler solution. The EU is already looking at the idea of relaxing its budget rules in the event of a war in Iraq. A protracted war could lead to economic slowdown and higher unemployment. Czech politicians who are unable to agree on public-finance reform in times of peace might find that war gives them an easy excuse to put off any decision.