Fiscal Fallout: Czech Government Faces Budget Law Breach

The Czech Republic's fiscal watchdog criticized Prime Minister Andrej Babis's new cabinet for their 2026 budget proposal, which violates fiscal responsibility laws by projecting a 310 billion crown deficit. This surpasses the permissible deficit ceiling, with key spending changes sparking criticism from various quarters.

The Czech Republic's independent fiscal watchdog has sharply criticized the new administration led by Prime Minister Andrej Babis for its budget proposal for 2026, projecting a 310 billion crown deficit that breaches fiscal responsibility laws. The watchdog argues this new budget proposal is unrealistic and surpasses the legal deficit ceiling.

The previous administration's draft had a 286 billion crown deficit, including expenditures on defense and a nuclear plant project loan. The Babis government's decision to reduce defense spending and drop the nuclear project loan meant that legally, the maximum allowed deficit should be 246 billion crowns, thereby exceeding by 64 billion crowns according to the Czech Fiscal Council.

The budget is now set for initial debate in parliament, amid Finance Minister Alena Schillerova's claim that it represented the utmost feasible option. The government's plan to boost spending in infrastructure and energy subsidies clashes with its move to reduce defense investment, in contrast to NATO goals.

(With inputs from agencies.)