President allows pension reform legislation to pass

President Václav Klaus on Thursday announced he was not going to veto the government’s pension reform legislation, effectively allowing the reform to come into effect in 2013. Following a meeting with the speaker of the lower house of Parliament, Mr Klaus said that he was not going to sign the bills either because of his objections to the reform. The president had earlier warned that the new system would increase the deficit in the pension system; he had also criticized the government for passing the bills without a broader public debate.

The pension reform, as shaped by the Czech centre-right government, will allow people to divert part of their social security payments from state-run pay-as-you-go system into individual accounts. To pay for the transition, the government will next year increase the lower VAT rate from 10 to 14 percent before introducing a single VAT rate of 17.5 percent in 2014.

Author: Jan Richter