The Role of the Institute of Fiscal Constitution in the System of Public Budgets in the Czech Republic

In the long run, public budgets in a great majority of developed economies suffer from recurring deficits and an increasing public debt. However, the condition of public finance deteriorated even in times of economic conjuncture, so the onset of the crisis in 2008 caught most of the developed world without financial reserves, or the so-called fiscal cushion. Thus most EU countries now fail to fulfill both the Maastricht Convergence Criteria and the Fiscal Compact Treaty, even if these are binding legal norms of the EU. Despite this, some EU countries voluntarily accepted a sort of financial debt cap, which the government of the Czech Republic accepted in February 2015 in the form of the so-called financial constitution, which contains a whole range of mechanisms at all levels of public budgets and public expenditures with a public debt in the amount of 55% of the GDP. The goal of this contribution is to analyze the content of the financial constitution, assess its structure and the aspects of its process application, and through selected public budgets also its possible influence on the whole economy. The content of the financial constitution shall also be compared to similar mechanisms abroad, especially in the neighboring countries.