Czech government faces rising budget deficit amid spending and defence disputes

The ruling coalition and opposition in the Czech Republic agree that the next year's state budget must serve the country's welfare, but they diverge sharply on how to achieve it. Economists warn that without fiscal restraint the deficit could swell to about 400 billion crowns, up from the current 310 billion. The government plans to increase defence spending by roughly 35 billion crowns, raising concerns about meeting NATO’s 2‑percent target.

A proposed budget‑responsibility law, which the president has vetoed, would allow the government to exclude large infrastructure and defence investments—estimated at around 145 billion crowns—from the deficit calculation. Critics say the measure lets the cabinet raise spending by up to ten percent in emergencies without parliamentary oversight, potentially inflating public debt and unsettling markets, which have seen Czech bond yields climb.

The debate reflects broader political tension as the coalition, led by Prime Minister Andrej Babiš, pushes forward its fiscal agenda while opposition parties fear a path toward unsustainable borrowing.