We hear lofty hypotheses that the world after covid will be different. He will probably be different, because we will not enter one river twice. But I wouldn’t be so subject. I think that if conditions more or less return to normal, that is, to something that was before the covid, whether it is due to vaccination or some other measure, or if the virus weakens so that it is not a fatal obstacle to society, then we will begin to return to the pre-ancestral state, in a number of areas. People will not stop having to travel, they will want to function to a large extent as they used to. Maybe it’s because I’m a little older, a conservative person, but the idea that everything will be different and that the industry and the production of things is outdated and that covid will turn everything into a modern economy is foreign to me. When I listen that we are the old-fashioned assembly plant and that we will now direct it elsewhere, where the developed world is heading, I am not sure. Who will direct it there? Any new planning committee to decide where the progress is?
Personally, I don’t think it will be so hot with the change after the covid. I think we’re going through the opposite lesson. A lesson in how the Western world is completely dependent on China. We are no longer able to produce most things and we have to import them from China. And when there is no capacity on ships or China does not want to send us anything, we will find ourselves in crisis and we do not know what to do. So change can also be contradictory – for example, it turns out that transporting many things across half the world does not make sense and that it might not be out of the question to make them here in Europe. I don’t want to play the prophet, but overall I don’t think the world will change dramatically.
A big change, at least for the Czechs, is that in the two years of the coronavirus crisis – if it lasts only two years – the country’s national debt may increase by perhaps less than a trillion crowns. Every Czech, including infants and pensioners, will owe two hundred thousand instead of one hundred thousand crowns. While we have worked our way to the first hundred thousand per capita for 25 years since the division of Czechoslovakia, we managed the second hundred thousand in two years. As head of the central bank, do you see this as a problem?
It’s a problem, of course it’s a problem. But it’s not that it should lead us to any hysteria, but it’s a concern. Because the money really exists, it does not fall from the sky, we have to borrow it on the market and pay interest on it. And we are a small open economy with its own currency. This means that in the future we will be expected to make some consolidation efforts after this increase in debt. To return to a reasonable debt trajectory that will not cast doubt on its sustainability.
Should the government start saving?
The current situation is no reason to make any sudden decisions and start cutting spending tomorrow. The problem is that we made one big mistake, which I dared to point out last year. And the fact that we have made a systemic change in the setting of taxes for individuals, which was not needed at all, makes no sense and, moreover, is not one-off. I have never criticized the strong fiscal support of the economy, and therefore of household consumption, at a time of the worst covid crisis. But this could be solved by one-off measures, which could easily have been even more forceful. So the government could have been more generous, but the measures were to be one-off and more structured to reach those who really needed them. Reducing taxes in the way that I will reduce them the most to rich people who do not need it at the moment is a big macroeconomic mistake.
And should it start in the area of taxation if a structural reform is launched that could consolidate public finances?
The state budget is a balance of revenues and expenditures. They cannot be separated from each other. I dare say that nowhere in the world can a sensible consolidation of public finances be done without affecting both sides of the balance sheet. And the extent to which the measures are intended to affect one or the other side of the state budget balance is already a very sensitive and complex political decision. But I agree with the view that in the future it will not be possible without raising taxes. As well as no correction in spending. But because we know the political cycle, we know that this process is being postponed to the future.
Perhaps it would be appropriate for the media, in particular on behalf of citizens, to ask the main political actors how they intend to deal with this during the election campaign. But it is clear that we will have to wait for those solutions. As part of the election campaign, politicians will probably not tell us what they think about raising taxes or reducing spending.
What would be the ideal way to recover the economy and prevent the majority of people from falling into existential financial problems?
It is a simple step that is immediately obvious. Vaccinate the population with the vaccine as soon as possible. What ever it takes. I have no doubt that in a month we will have enough vaccines and, in a way, we will not know what to do with them. But I am worried that we will be prepared logistically. At such a moment, all forces, resources and resources need to be deployed to handle this operation as quickly as possible. In the future, where I see a great opportunity to do the right thing, it is to make the most of the European money that will come. From the point of view of our economy, they will be large and – as we know – we traditionally do not know much about using these resources. There, I would consider it necessary to prepare a sensible strategy.
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