Wage growth must be priority for next government - Zaoralek

PRAGUE– 20 September 2017: The next Czech government should spread the benefits of strong growth with workers and shift to a higher wage economy, Lubomir Zaoralek, who will lead the ruling Social Democrats into next month's election, said on Wednesday.

The center left party trails its coalition partner, the ANO movement, by double digits ahead of the Oct. 20-21 vote but Foreign Minister Zaoralek says it can attract voters concerned with economic fairness.

The Czech Republic is heavily industrialized and has a large auto sector. Strong growth, which stood at 4.7 percent in the second quarter, has led to labour shortages and increased wage demands.

Private sector wage growth has led public sector workers to demand higher pay and the government has increased salaries for health and education workers who have long lagged behind.

"If the society is to remain united ... when there is prosperity, then that has to be for all," Zaoralek, 61, said in an interview. He said his priorities were wage growth, education and lifting living standards to those of western Europe.

The outgoing government has raised the minimum wage each year. The latest rise set wages at 12,200 crowns ($561.23) per month and takes effect next year.

It also agreed to increase teacher salaries. Teachers are the worst paid as compared to other skilled professions in OECD countries.

Zaoralek said the country needed a new economic model that could produce higher margin goods even it meant some companies dependent on cheap labour shut.

Such a shift would echo developments in export industries where wage growth has forced companies to innovate to maintain margins. Czech workers make about a third of their German counterparts.

WESTERN NEIGHBOURS

To catch up with western neighbors the country needs to keep in step with EU partners as the bloc debates its post-Brexit future, he said, adding that the country is interested in getting observer status in the euro zone.

But it should not push to join the euro zone quickly, he said. Such a push could encounter opposition from potential coalition partners.

Zaoralek's stance differs from that of outgoing Prime Minister Bohuslav Sobotka who says the next government should set a date for joining. Most Czechs do not want the country to join the currency bloc.

Zaoralek said elections are often decided in the final days of campaigning so the Social Democrats could still form the next government. No party is expected to win an absolute majority and opinion polls have proved inaccurate in previous elections.

One headache for both ANO and potential coalition partners is that parliament voted this month to allow police to charge ANO founder and chairman, billionaire Andrej Babis, with fraud in drawing EU subsidies. He denies wrongdoing.

Zaoralek said he could not see Babis in the next cabinet if he were charged. He did not rule out a coalition with the ANO movement if Babis is not prime minister.

"It is tough to build a coalition with someone who is being prosecuted .... That is unimaginable," he said.