ISSN 1822 – 8402 EuropEaN INtEgratIoN StudIES. 2009. No 3

CzECh NatIoNal aNtI - CrISIS plaN IN a EuropE of KNowlEdgE
CoNtExt 1

Ingeborg Němcová
Stanislava Mildeová

University of Economics in Prague

Abstract

Financial crisis quickly followed with economic decline all round the Globe has been reaching also the
Central European area including the Czech Republic. In February the Czech government presented National
Crisis Management Plan. The first part of the article discuss the differences in EU member states approach
to the crisis since the Czech governmental response differs to another anti - crisis programs, especially those
of the largest countries. If these ones are seen mostly to assist the declining demand side the Czech plan is
focused on supporting the supply side. The present right-wing Czech government considers a growth of a
public debt more serious danger compared to a cyclical economic slowdown. This is a main issue of all the
governmental approach. The Czech Anti - Crisis plan has been certainly reflecting the European Economic
Recovery Plan (EERP) basic ideas from December 2008 to some extent. This reflecting extent is a base for
hypothesis formulation. The Czech government has paid to the goals of Lisbon Strategy on Growth and Jobs a
relatively small attention. Basic hypothesis of the article is a question if the approach of the Czech government
under the economic crisis has been changing. The EERP requires not only short-term measures focused on
fiscal boosting of the demand side of the economy but also to address the long term challenges – providing
conditions to support structural changes of the economy. EERP is a part of Lisbon Strategy for Growth and
Jobs in the current crisis.

Recent developments of the Czech economy marked with bankruptcies of large producers from traditional
glass and porcelain industries are confirming the need of a structural change. Such a change shall respect more
the development of costs (costs of labor especially) in labor intensive industries. Structural change which has
been predicted in the leading ideas of the Lisbon Strategy: getting ready and building up an information/
knowledge society and prepare an easier way for companies to go through structural changes towards economic
activities using more efficiently advantages of such a society. Global economic crisis can be taken also as a
concentrated control of competitiveness. And competitiveness is a way of keeping Europe employed. The
article is focused on analyses of the Czech Anti-Crisis Plan from point of medium and long term measures of
the Lisbon Strategy reflected in the EERP contributes to the structural change agenda.

Analysis will examine the following parts:
Support and expenditures on Research and Development
Support and expenditures of education and life-long learning
Measures supporting flexibility of companies and creating for them a space for structural change.

Finally an importance of specific measures to orient and motivate companies to move in direction of the
structural change is discussed.

Keywords:

Czech Anti-Crisis Plan, Europe of Knowledge, Lisbon Strategy on Growth and Jobs.

Introduction

Let start with a question: Is part of the Czech economy
related to a knowledge economy in danger? Funds for
education R&D have always been economized in the
CR. The upcoming crisis is requiring extra expenses
on economic stabilization. Are these areas going to be

first victims of the crisis, since these funds will be the
first economized? Recommendations from the Lisbon
Strategy and the EU for this area have not been taken as
binding in the CR.

The financial crisis and its impacts on countries
require an active governmental stabilization policy,
which will affect public finance (rising of expenses or
reducing income). Also, taking into account the revision
of budgets of companies and families, the question on

1 The paper is a part research supported by the grant GAČR
402/07/0521.

ISSN 1822-8402 EUROPEAN INTEGRATION STUDIES. 2009. No 3

sustainability of industries of knowledge economy is
legitimate.

The answer will be given on the base of analysis
of the available data on financing of these industries
and evaluation of priorities and recommendations of
stabilization programs. Stabilization programs priorities
in general, as they are recommended by the OECD and
European Economic Recovery Plan (EERP), will be
compared.

We are aware of the great simplification in limiting
the knowledge economy in only education and R&D
industries. But the core of the research is on describing and
estimating the future approach of the Czech government
towards these parts of the economy, especially if the
government will be under pressure of an economic crisis.
The Czech government has not considered a knowledge
economy as a priority and only gave the minimum
acceptable amount of funds.

Our approach to the analysis is based on system
dynamics, although the feed-back which is the core of
this method will not be emphasized.

The OECD and EU recommend to their members to
take the knowledge economy industries as one of the
most important priorities of their stabilization plans.
That is why we summarize the main principles and steps
of these stabilization packages.

Since the 80s we can observe the diminishing role
of the state in the economy: as a result of liberalization
the share of public finance of the total GDP has been
reduced and privatization cut down the public sector.
The number of tax and fiscal reforms affected the size
and role of automatic stabilizers built in the systems.
The EU countries have more of these stabilizers built in
than the U.S. These countries also declared that a present
level of integration has a specific value, which should not
be threatened.

overview of principles of active stabilization
plans

The anticipated hit of the present crisis is so strong
that the governments must take an active approach, an
active stabilization policy. It is up to every government
to pick up ingredients and find an optimal mixture for
their stabilization program:

A. Time horizons of effects and mechanisms of
different instruments and measures have to be
considered and reflecting the course of the crisis
priorities should be chosen.

B. Sectors, industries and branches where the
stabilization will aim:

Financial sector stabilization including limiting 1.
of credit crunch. Part of the credibility recovery
plan will be financial markets reforms.
Industries with the highest multiplier of 2.
growth.

Areas with the most concentrated problems 3.
(environment, infrastructure, the energy
sector)
Use the crisis to prepare and start a new 4.
structure of economy which will be a base for a
long term economic growth.

C Side of the market – to whom and in what way will
assistance come from stabilization provided:

Demand 1.
Supply 2.

D Distribution of costs and contributions of the
stabilization and affects of the crisis.

General or selective assistance1.
All the economic subjects will take part in 2.
financing the stabilization, but their shares
differ:

state using public fundsa)
companiesb)
householdsc)

At a beginning period of crisis is very hard to
estimate effects of the national stabilization plans.
It is a politically legitimate to dispute distribution
of costs and contributions of the stabilization and
the affects of the crisis among the different social
groups in the society.

The same decision about distribution of costs 3.
and contributions of the stabilization plan
must be made while considering international
aspects:

home country and domestic interests1)
other – foreign countries2)

Such a decision is important in cases of:
integration area, especially regional a)
integration
Cases of introduction of restrictive trade b)
policies

E. In t case the stabilization cost are covered by the
state:

Expense side of the governmental budgets1.
Reducing the income side2.

Every country has to find its own combination. The
choice will be influenced with:

characteristics of the particular economy and its 1.
potential
political orientation of the government2.

The oECD and Eu recommendations

European Economic Recovery Plan (EERP) is based
on a majority of principles recommended by the OECD.

The present level of integration is considered
important and its potential could be used for stabilizing
the Member states’ economy. The Plan is based on two
pillars and one underlying principle. The first pillar brings
a massive impulse to purchasing power stimulating
demand and supporting recovering of credibility. This

ISSN 1822-8402 EUROPEAN INTEGRATION STUDIES. 2009. No 3

pillar fully respects the Stability and Growth Pact. The
second pillar is based on a direct short –term action to
reinforce competitiveness of the EU in the long –term.
This represents ”smart investment“ to:

Develope the wide spreading of knowledge and 
abilities for tomorrow needs
efficiently create jobs and reduce energy 
consumption
Clean technology (construction, automobiles) to 
get ready for low-carbon markets in the future
Infrastructure to promote efficiency and 
innovations.

The basic principle is solidarity and social justice.
From the knowledge economy point of view the

crises can be considered as a challenge to an „intelligent
destruction“. Sources which will be used for stabilization
could be driven in a way to support basic structural
changes.

From the knowledge economy point of view the
crises can be considered as a challenge to an „intelligent
destruction“. Sources which will be used for stabilization
could be driven in a way to support basic structural
changes.

National Anti-crisis plan of the CR

The CR government introduced its national Anti-
Crisis plan in the second half of February, 2009. The plan
does not prefer any direct stimulus to a demand side and
is fully concentrated on the supply side. The aim is to
create an environment for reduction of costs. Part of the
plan is also a number of instruments supporting export
in area of insurance and crediting. These instruments are
substantial in an extensively export oriented economy like
the Czech economy. Another set of tools, like reduction
of social insurance payments, is focused on preservation
of jobs. Actually there are three main interconnected
priorities: preserving jobs through reduction of costs and
keeping public finance balanced within the Maastricht
criteria. There is no mention of knowledge economy or
investments in this area among the priorities.

Realization of this anti-crisis plan was stopped almost
as soon as it started because of the political situation. The
government which introduced this plan lost the support
of the majority in the Czech Parliament. It is evident
that this plan will be revised in the first decade of April
2009. The Parliament political parties have been pushed
by the President of the Republic to create a temporary
large coalition – every party will have its representation
in the temporary government. There is a high probability
that a new consensual anti-crisis plan will be set up as
consent and some measures from the Social Democratic
Stabilization Program will be added.

Recent proposal of a new governmental
stabilization plan is described in the following table.

Scheme 1 proposal for a new consensual
stabilization plan of the CR

Government proposal Opposition proposal
Reducing of social insurance
payments paid by employers

Financial subsidy to
purchasing a new car
(30 thousand CZK)

Acceleration of depreciation Increasing of tax reduction of
families with children

Amendment of bankruptcy
law

Extension of periodand
growth of unemployment
allowances
Family allowancesgrowth

Source: http://aktualne.centrum.cz/domaci/politika/
clanek.phtml?id=629839#tabule, 8.4.2009

It is true that the Social Democrats; plan, which
is a part of their pre-election program, contains a part
solely focused on the development of an information
society. Briefly said, their program reflects the EERP
recommendations concerning more the knowledge
society support. But none of the theses are in the
negotiation. The final consent and priorities is hard to
guess at this point.

Let’s look at the expenses on R&D and on education
in more detail and compare them with the trends in the
resent years.

Recent financing of knowledge economy
industries in the CR

The recent financing of knowledge economy
industries in the CR were below average in the EU and
OECD members. This average is about 6%; it is in the
CR 4.7%. 2 Demographic development cannot explain
this numbers. Low financing was visible at tertiary
education, where the total cost per student dropped down
for more than one third in 1995-2005. Costs per student
had stagnated in other countries, too, though there was
a little decline in Slovakia (6%) as well., An increased
occurred only in Hungary, where rescuing the general
financial situation required large cuts at an expense side
of the Hungarian public finance after 1995. 3 The Czech
data have not improved to date.

Financing of R&D shows a different picture. The
European Council in Barcelona (2002) recommended to
the Member States to give 3% of GDP to R&D and 2/3
form private business resources. That means 1% of GDP
from governmental resources.

According to the last available statistics from 2006,
R&D received 50 billion CZK and 28 billion came from
private businesses. Compared to 1995, it was 3.6 times
more, and the GDP had risen 2.2 times. Such a rate
of growth of these expenses put the CR on the top of

2 Education at a Glance - OECD Indicators 2008, http://www.
oecd.org/dataoecd/23/46/41284038.pdf, p.237, 30.3.2009
3 ibid

ISSN 1822-8402 EUROPEAN INTEGRATION STUDIES. 2009. No 3

the statistics. The reason for this development was an
economic growth and a new set of incentives for investors
shifting their attention from labor intensive branches to
branches with a higher value added. Anyway, the share
of R&D expenses remained 1.55% and the governmental
share under 1%.4

The largest portion went to a technical R&D connected
to an automotive industry. It was 2.5 more than what
went to medical research and 22 times more than what
went into the humanities. 5 This orientation was related
to a concentration of automotive industry in the CR ant
its importance for the whole economy and export. It is a
little exaggerated but this used to be compared to Finland
(Nokia). Expenses of the private sector into the technical
R&D brought a good number of patents as it is seen at
the following scheme.

Scheme 2. Selected indicators of a scientific and
innovation profile the CR in 2006

ČR OECD Average

Notes:
1 Business Expenditures on R&D as a % of GDP
2 Governmental Expenditures on R&D as a % of GDP

3
Human Resources for Science & Technology
occupations as a % of total employment

4
Science and Engineering degrees as % of all new
degrees

5 Researchers per thousand total employment

6
%of Governmental Expenditures on R&D
financed by abroad

7 Patents of foreign co-investors
Source: OECD Science, Technology and Industry Outlook
2008: Profile of the Czech Republic, ISBN 975-92-
54-04-01, OECD, 2008, p. 113, http://www.oecd.org/
dataoecd/17/34/41559010.pdf, 30.3.2009

Expenses for knowledge economy planned in the
National anti-crisis plan of the CR

The plan is not considering any specific program
towards education. There are only two steps. The first
one is an offer to employers to send their employees to
4 Dubská, D.: Polovinu výzkumu a vývoje v ČR financují firmy,
HN IHNED 4.10.2007, http://hn.ihned.cz/c1-22152950-polovinu-
vyzkumu-a-vyvoje-v-cr-financuji-firmy, 15.03.20095 ibid
5 ibid

educative courses instead of laying them off. Wages and
salaries of these employees will be covered up to 80%
from an Operation Plan “Adaptabilita“ which is financed
from the EU Social Fund. In the recent cases of lays off
no company has used this opportunity.

The second measure is connected to releasing funds
from the state budget. Every budgetary chapter has settled
a percentage which is the potential cut off in a case of
instability. This percentage is 8-10% but education has
only 0.5%, and in the case of R&D, 0%.

A little increase of governmental expenses on R&D
has been already a part of this year budget. The total
growth is 1.5 billion CZK. This represents just a small
increase of a percentage of GDP given to R&D. The core
question will be development of private funds on R&D.
There are no measures that will stimulate them in the
plan.

Conclusions

With the assumption of no dramatic development of
the Czech public finance within one year, we expect the
sustainability and perspective of the Czech industries of
knowledge economy as far from their financing from
public funds. There is an estimation of the same or even
a little rise of public sources. Uncertainty is coming from
the private sector since this share was almost two thirds
of the total financial sources given to these industries.

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Received in March, 2009; accepted in April, 2009.