The Czech Exception

What were the Czech Government’s reasons for not signing the European Fiscal Compact?

The way I’d rather put it is that at that point in time there weren’t sufficient reasons to justify the signing of the fiscal compact, since in terms of substance it is primarily of concern to Eurozone countries. One might further object that it does not include a public debt criterion, nor does it provide an opportunity for countries that are not part of the Eurozone to participate in newly institutionalized Eurozone summits. In the course of negotiating the wording of the fiscal contract I have repeatedly drawn attention to its many flaws, such as the fact that significant last minute changes in wording were introduced as late as during the actual European Council meeting, immediately preceding the final discussion on the signing of the compact.

While the fiscal compact was being negotiated the Czech government announced its intention to carry out a referendum on adopting the Euro. Why hold a referendum, given that the Czech Republic has committed to adopting the Euro as part of the accession talks and so far there has been no indication that Prague might be granted an exemption similar to that of the UK and Denmark?

It is true that by passing the 2003 referendum on EU accession Czech citizens have indeed agreed to adopt the Euro. A future introduction of the common currency was part of the accession contract. The government is aware of this obligation and intends to uphold it. At the same time, it has to be said that the Eurozone and its currency have recently undergone fundamental systemic changes—I am referring to the European Financial Stability Facility, the European Fiscal Stability Treaty or fiscal compact—and as a result it has become quite different from what it was nine years ago, when citizens of the Czech Republic voted to join the European Union. I regard it therefore as completely legitimate to offer the people an opportunity to confirm their willingness to adopt the Euro under these changed circumstances. Let me point out that the opt-out negotiated by Great Britain and Denmark on union level is not particularly relevant when it comes to domestic procedures—after all, Sweden, which has not negotiated any exemption in this respect, also held a referendum on adopting the Euro.

In a few months the EU countries will start fighting about the budget for the forthcoming period. Prague hasn’t joined the other new member states in demanding a budget increase. Why is that?

One of my government’s priorities is to consolidate public finance, as suggested by our our sobriquet, the ‚government of budget responsilibity‘. We believe that the current economic situation and the crisis experienced by a number of Eurozone countries, brought about by irresponsible squandering of money and running up of disproportionate debt, calls for a policy of austerity and of restricting expenditure to those projects that are of real benefit. The EU budget consists primarily of contributions from its member countries and it must therefore be commensurate with our possibilities. Besides, experience—not least our Czech experience, alas—has clearly taught us that a bigger budget does not automatically mean more. Eurozone countries that draw most heavily on European funds are not identical with those that have now found themselves in economic dire straits. Much more important than the overall level of expenditure is whether monies have been used sensibly and effectively in areas that provide genuine added value in terms of fostering economic growth and competitiveness. In addition, we have to realize the increasing long-term financial likelihood of the Czech Republic joining the ranks of countries that are making a net contribution to the European budget.

What importance does the Czech government attach to further EU enlargement?

The Czech Republic is a country with a tradition of explicit support for further enlargement of the European Union. Enlargement has proved to be a successful and effective means of supporting stability, economic prosperity and democracy in Europe. In this respect, I regard the recent finalization of accession talks with Croatia and the signing of the accession treaty of 9 December 2011 as a great achievement. Earlier this year a European Commission monitoring report on Croatia’s meeting of obligations arising from EU membership gave a positive assessment of the progress achieved. Provided the pace of reform is maintained, I think Croatia is highly likely to accede to the EU by 1 July 2013.

What is the Czech Republic planning to do to reduce the country’s dependence on Russian energy?

The Czech Republic has been pursuing a policy of diversifying its sources of energy and energy transit routes with a view to reducing our vulnerability in case of temporary problems affecting a particular geographic region or transit route. In terms of natural gas we have championed the development of the Southern energy corridor and the exploitation of the North-South link, which seeks to connect the Czech Republic with LNG terminals in the Baltic and Adriatic seas. As for oil, we have been striving to safeguard the integrity of the current connection to the Trieste terminal via the IKL pipeline as well as focusing on the Caspian Sea. We have further endeavoured to optimise the energetic mix by fostering nuclear energy in order to limit, for example, oil imports necessary for the production of electricity. Increasing energy efficiency is another appropriate step to take towards reducing our dependency on imports, in that a more effective use of our resources will enable us to import smaller quantities of energy. This will have a positive impact on our foreign trade balance sheet, among other things. However, an adequate investment into our energy infrastructure and a proper functioning of the European energy market are crucial prerequisites for achieving these goals.

The Czech Republic is betting on nuclear energy, which is featured prominently in various long-term energy plans. Isn’t this, again, a de facto fixation on a single energy source, this time not in geographic terms but rather in terms of the technology used? Wouldn’t it also make sense to diversify in this case, and to shift partly to renewable resources?

Given the Czech Republic’s geographic position, which places considerable limitations on the choice of sources of energy, nuclear power logically forms a key part of the Czech energy mix. However, this doesn’t mean that we will rely on nuclear energy alone. Nevertheless, if we want simultaneously to reduce carbon emissions to meet our European Union commitments, nuclear energy will be indispensable during the transition to a low-carbon economy. Of course, this form of production will be suitably complemented by an increased share of natural gas and an appropriate use of renewable resources. However, these have to be used in a meaningful way and to a sensible degree.

Defence expenditure in the Czech Republic is among the lowest in the EU. Might this not pose a future threat to the country’s security?

I dare say that in the modern history of our state the security of the Czech Republic has never been better safeguarded. Nevertheless, safeguarding the country’s security is a neverending and key priority for any government. The new Security Strategy of the Czech Republic, adopted by the government in September 2011, is a good indication of the importance we attach to this issue. Our active membership of NATO and the European Union continues to form the basic pillar of our defence, and we would like to help strengthen the EU’s ability to weather crises and to cooperate with partner countries. To ensure collective security we have to strive to maintain solidarity among member countries, not least by meeting obligations arising from our membership in international organisations. Although the risk of a classic 20th century military conflict is currently very low in our part of the world, we are facing new security risks, which we have to prevent and to which we have to be ready to respond. These threats will determine the volume, and especially the focus, of our defence expenditure.

Are there any interests that the Czech Republic and Poland are trying jointly and actively to advance?

The Czech Republic and Poland share a whole range of common interests. Within the EU our countries have been advancing these interests, for example, by means of a very effective and well functioning cooperation as part of the Visegrad Group. The two countries have identical or very similar positions on a number of issues, from energy policy, through climatic goals to unambiguous support for finalizing an internal market. One of our priorities, just as it is for Poland, is a further enlargement of the European Union, as well as an emphasis on cooperation with Eastern Partnership countries and a common EU foreign and security policy. There are many other possible areas of common interest. For instance, I might mention a strong and effective policy on cohesiveness, aimed primarily at improving the competitiveness of converging regions, which both countries have championed in the course of the current negotiations on a future longer-term financial framework.

The Czechs and the Poles have a very different approach to Union affairs. May this not prove an obstacle to closer cooperation between the two countries?

As my reply to your previous question indicates, there is more agreement than disagreement between the Czech Republic and Poland regarding EU affairs. Your question seems to reflect the kind of shorthand the media have artificially created and presented to the public as a contradiction between the pro-Union Poles and the allegedly eurosceptic Czechs. In my view, this picture is completely inaccurate. The Czech Republic, just like Poland and all other member states, treats European integration not primarily in terms of ideology, by welcoming or rejecting all EU initiatives wholesale, but rather by judging individual proposals of the European Commission mainly in terms of their substance and purpose. The European Union is a project under development. If we want to ensure that we can exert adequate influence on the decisions relating to its future shape, we have to be actively involved in that process, and that also includes a critical assessment of each and every proposal and a businesslike advocacy of Czech priorities.

How do you see the shape of the European Union in 20 years’ time ?

The answer to this question would be tantamount to reading a crystal ball. The European Union, and the Eurozone in particular, will have to face fundamental changes in the way they have been functioning. The economic and financial crisis has clearly exposed the flaws inherent in the present-day organisation of the economic and monetary union, by failing to accompany a unified monetary policy with a corresponding degree of economic convergence and coordination of economic policies in the Eurozone countries. It is obvious that the current shape of the Eurozone is in need of systemic change if the project is to survive. It is vital that two types of steps be taken: short- and medium-term steps towards stabilizing the public finances of the indebted members states, as well as long-term institutional changes in the Eurozone to bring it closer to a political and economic union. As for the European Union as a whole, I personally believe that, given the number of member states and the variability and range of their interests as well as varying integration needs, the so-called variable geometry model would be the most feasible and effective option. If it retains a sufficiently strong common basis, which in my view is represented by the internal market, this option will ensure that countries wishing to go further in some areas of integration are not blocked by countries that do not feel this need. And at the same time, it will ensure that closer integration is not imposed on countries that do not want it. The model I have outlined will preserve the dynamic of the process of integration and a positive attitude to the European Union arising from a sense of ownership of the whole project on the part of member states and their populations.