Unions speak loudly but carry a small stick, the case for grounding flyboy Tvrdik

By Jan Machacek, Prague Business Journal, 1 September 2003

Trade unions are threatening the government of Prime Minister Vladimir Spidla with a general strike of the magnitude of that which occurred in November 1989. The unions don't like the planned public finance reforms. They want to soften them, that is, take out any changes worthy to be called reforms.

Of course there is ample reason not to expect the unions to be able to pull together a strike of such a significant size or even get anywhere close to such an ambitious goal. All of the recent union protests have been a mere fraction of the size that their organizers have promised. Czech union activists are lazy, apathetic and badly organized. They often promise to protest but in the end stay at home with beer, TV and dumplings.

This summer's story of angry trade unions reveals more about the summer media than the state of the labor unions. Every summer, the media—and especially the dailies—find the news pickings slim and scramble for stories worthy of exaggeration for the front page. So when union bosses threaten a general strike, no matter how remote the possibility, it's the closest thing to drama on the horizon and becomes a front-page headline.

Without the summer and without the media, no one would pay attention to the unions, which are lost and forgotten. So they might as well just stick with the dumplings.

No way out

But the unions aren’t alone in dreaming of a softer public finance reform. Influential MP and CSSD “dissident” Josef Hojdar is also demanding major changes in the reform proposals that would render them toothless. He has gone so far as to threaten to take down the government if his proposals aren’t adopted.

What the critics of the reform proposals fail to appreciate is that there is no room for softening the reforms. Obviously, different reforms could have been prepared, but it is impossible to make the current proposals softer, that is, more socially acceptable.

There is no such thing as socially painless reform. Reforms must be painful, and the unions and Hojdar should know that every new government will (or will have to) push through reforms that could be even more painful.

Why? If the government falls, there are two options: a new government is formed, a new coalition is created, or we will have to go through the process of new preliminary elections. In both cases, the reforms will have to be renegotiated politically.

That takes time. For this government, the negotiations on the budget cuts and the tax regrouping took more than a year. It wouldn’t be any quicker for any newly formed political coalition. That means that another year is going to be lost, and that extra year of inaction would create the necessity for even tougher reforms because the advantage of distributing the costs of the reforms over a longer period of time would be lost.

The unions should also realize that fiscal reform is not the invention of Finance Minister Sobotka and Spidla or some other politicians. There are strict European Maastricht rules or criteria, that we are legally obligated to follow. We do not have an opt-out like the Danes or the Swedes about the European monetary union. We have to become members of the EMU, so we must follow the rules, which are the Maastricht criteria.

Another cause for reform is the Czech crown. If the reforms fail during the fall, or if the government falls, analysts have predicted that currency turmoil could follow. The crown is already weakening. On the one hand, foreign investors are still more than willing to lend us a lot of money. On the other hand, their mood can change quite abruptly.

Then the budgetary cuts will have to take place under the dictates of big London or Paris creditors and international institutions. Such reforms, under the crisis management and supervision of London or Washington institutions, will naturally be less socially sensitive. Such reforms will have to be done quickly, decisively, simply and transparently, that is, in cold blood.

A fly-by-night deal

How silly we were to think that the days were over when career politicians were placed in posts in companies connected to the state. But we are alone in our shock and surprise. More and more media seem to be taking for granted that former defense minister Jaroslav Tvrdik is really going to become CEO of Czech Airlines (CSA). Tvrdik himself doesn’t deny it, and he clearly has the support of influential union pilots.

While CSA is still in state hands, there is no reason not to treat it like any normal business, especially in these days of struggling airlines. Management expertise is critical. So the head of the company should be chosen in a tender, and the person selected should be someone who understands finance and business, who has the experience of communicating with banks and insurance companies. He or she should be a manager who is fluent in several languages and perfect in English. An MBA from a prestigious university would seem to be a minimum requirement.

Until the mid-’90s, this country lacked people with high quality education, but in recent years the situation has improved somewhat. More and more people have been returning from Western universities. The top job at CSA is certainly a very lucrative managerial post and would normally attract a lot of qualified candidates.

Tvrdik is a career military man who knows nothing about business. He is bad in languages and as for his finance skills, the army isn’t quite the place to hone those.

So what we have here is yet another episode in the long-running saga of “Forward to the Past.”

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