Klaus on our economic difficulties...

The President of the Czech Republic is one of my heroes...

The economic crisis should be regarded as an unavoidable consequence and hence a “just” price we have to pay for immodest and over-confident politicians playing with the market. Their attempts to blame the market, instead of blaming themselves, are unacceptable and should be resolutely rejected. The Czech government will – hopefully – not push the world and Europe into more regulation, nationalisation, de-liberalisation and protectionism. Our historical experience gives us a very strong warning in this respect.

Looking for ways out, we should – to use an analogy – strictly differentiate between fighting the fire and drafting fire protection legislation. We have to concentrate on the first task now; the second one can be done gradually, without haste and panic. A big increase in financial regulation, as is being proposed so often these days, will only prolong the recession. Growth in the global economy is falling rapidly, the banks have ceased to grant credit and confidence is ebbing. Radically changing regulation governing financial institutions in the midst of recession is counterproductive.

Aggregate demand needs strengthening. One traditional way to do this is to increase government expenditures, probably in public infrastructure projects, on condition these are available. It would be much more helpful, however, to have a great reduction in all kinds of restrictions on private initiatives introduced in the last half a century during the era of the brave new world of the “social and ecological market economy”. The best thing to do now would be temporarily to weaken, if not repeal, various labour, environmental, social, health and other “standards”, because they block rational human activity more than anything else.

As regards the EU’s “constitutional” stalemate, the Czech government will – hopefully – not lead Europe to an ever-closer union, to a Europe of regions (instead of states), to a centralised, supranational Europe or to an increasingly controlled and regulated Europe masterminded from above. It will keep stressing its EU presidency slogan “Europe without barriers”, which means the advocacy of further liberalisation, removing trade barriers and getting rid of protectionism.

Our historical experience gives us a clear instruction: we always need more of markets and less of government intervention. We also know that government failure is more costly than market failure.