COALITION AGREEMENT

The Czech Social Democrat Party
represented by its chairman, PhDr. Vladimír Špidla,
and statutory vice-chairman, Mgr. Stanislav Gross,
and
the Christian Democratic Union – Czechoslovak People’s Party
represented by its chairman, JUDr. Cyril Svoboda,
and 1^st vice-chairman, Ing. Milan Šimonovský,
and
the Freedom Union – Democratic Union
represented by its acting chairman, Ing. Ivan Pilip,
and vice-chairman, Ing. Pavel Pešek,

in pursuance of their joint efforts to implement the principles of the European social model based on a socially and environmentally oriented market economy, which embraces the respect for democracy and human rights, free trade unions, representation of employers, participation of employees in the management of businesses, support to natural human communities and to the civic society, social protection based on the principles of solidarity and subsidiarity, protection of private ownership, equal opportunities and dignified living conditions for all, including, without limitation, preparations for the demographic ageing of the population,

hereby enter, on the basis of the results of elections to the Chamber of Deputies of the Parliament of the Czech Republic and in compliance with their respective election programmes, into the following

COALITION AGREEMENT

PART ONE

I.

The parties hereto declare as their common goal, which they agree to reflect in the work of their respective groups within the two chambers of the Parliament as well as in the Policy Statement of the Government of the Czech Republic, the following priorities of the country’s further development:

- speedy accession of the Czech Republic to the European Union, subject to negotiation of the best terms and conditions for the Czech Republic;
- development of a social state on the basis of socially concerned market economy and environmentally oriented economy and for the purpose of preservation of social cohesion and social consensus;
- development of favourable conditions for free enterprise, sustenance of economic development, growth of the gross domestic product, and balanced development of regions and municipalities;
- intense struggle against all forms of corruption and serious economic criminal offences;
- universal support to education, science and culture;
- development of a democratic rule-of-law state and its self-governing elements;
- gradual remediation of public finances;
- permanently sustainable development and protection of the environment;
- balanced foreign policy of the state and involvement in the struggle against international terrorism;
- intensification of participation of citizens in the decision-making process.

The parties hereto agree that, in respect of any and all their activities, they will endeavour to implement the above priorities, as and when appropriate, pursuant to the provisions contained herein.

II.

ACCESSION OF THE CZECH REPUBLIC TO THE EUROPEAN UNION

The parties hereto agree to take any and all action to successfully complete the accession negotiations with the European Union as of 1 January 2003 with the objective of acceding to EU in 2004. By the foregoing deadline, the parties hereto shall submit and ensure enactment by both chambers of the Parliament of any and all legislative acts necessary for the completion of harmonisation of the Czech law. (See Annex No. 1 hereto.)

The parties hereto shall jointly endeavour in respect of the outstanding negotiation issues to negotiate the most beneficial conditions for the Czech Republic.

Accession to the European Union will be very demanding in terms of communication with the general public. Both parties hereto accept as their joint task to convince the public to participate in the referendum and to agree to the accession to the European Union.

Upon accession of the Czech Republic to the European Union, we shall endeavour to gradually overcome the restrictions imposed in connection with the initial period of membership. We shall create such conditions as will improve the competitiveness of the Czech agriculture, seek to make the maximum use of membership in the European Union to assist the regions that are undergoing economic and social transformation.

The Czech Republic wishes to participate in the designing of a new European democratic and social model, which will embrace the respect for the principle of democracy and human rights, and for the dignity of all nations. Therefore, we shall endeavour to achieve political integration of the European Union and to promote any and all efforts towards further intensification of European integration based on democratic principles.

III.

SOCIAL COHESION, SOCIAL CONSENSUS, EMPLOYMENT, FAMILY POLICY, HOUSING, HEALTH CARE.

SOCIAL COHESION, SOCIAL CONSENSUS, EMPLOYMENT

/1/ The parties hereto shall promote the development of a social state that will motivate its citizens towards responsibility for selves, for their families and municipalities, at the same time preventing irresponsible individuals from abusing the resources belonging to those truly in need.

/2/ The parties hereto agree to exert their best efforts to preserve social cohesion and social consensus and, to that end, the parties agree to pursue an active employment policy consisting in implementation and modernisation of the hitherto implemented legislative as well as executive tools, and to actively encourage social negotiations within the Council for Social and Economic Consensus, and to encourage the establishment of tripartite arrangements on the regional level.

/3/ The parties hereto agree to consider the Social Doctrine of the Czech Republic as a long-term orientation guideline for the drafting and implementation of the country’s social policy.

/4/ The parties hereto agree to encourage and develop any newly emerging forms of social dialogue including, without limitation, involvement of our social partners and the Government in the multinational social dialogue.

/5/ The parties hereto shall encourage the establishment and development of public organisations, including transformation of the existing contributory organisations to such organisational form. They shall cultivate conditions for the activities of representations of both the employees and employers, as well as other organisations engaging in the protection of economic and social interests, and shall promote their representation in the self-governing bodies of public and not-for-profit private institutions operating in the social area.

/6/ The parties hereto agree to promote active participation of the Czech Republic in the activities of ILO.

/7/ The parties hereto agree to endeavour to preserve social cohesion, in particular by pursuing an active policy of struggle against poverty and social exclusion.

/8/ The parties hereto agree to promote the creation of the maximum possible space for equal assertion of the not-for-profit sector in social services.

/9/ The parties hereto shall draft the legislative basis for an overall reform of the pension system such that the Pension Fund becomes separated from the state budget, preserving the ongoing system of old age pension funding with the state guarantee.

/10/ The parties hereto shall ensure the necessary development of the social security provider and application of a part of the privatisation revenue to the benefit of the pension system reform.

/11/ The parties hereto shall promote further development of the supplementary pension insurance (superannuation) scheme, including the suitable form of employee supplementary insurance.

/12/ The parties hereto agree to promote a new legislative framework for social assistance providing also a basis for a high-standard social care accommodated to the needs of individuals. Both parties hereto agree to significantly improve the network of all forms of social services. They shall promote completion of a system that will effectively and efficiently facilitate integration of handicapped individuals, including with the help of personal assistants.

/13/ The parties hereto agree to draft and submit a new Labour Code intended to contribute to the preservation of existing and creation of new job opportunities. The Labour Code will preserve the existing standard of protection of employees as guaranteed by law, at the same time increasing the role of collective agreements and collective bargaining on corporate and sector levels, including public administration.

/14/ The parties hereto agree not to encourage any restrictions of trade union rights as set out in laws and legal regulations, and shall ensure that such rights are not violated, in particular on the corporate level.

/15/ The parties hereto agree to seek a more efficient and prompt enforceability of law in the labour-law area, including obligations ensuing from collective agreements.

/16/ The parties hereto agree to establish an independent labour inspection authority and to promote the establishment of a new, continuously financed public system of accident insurance.

/17/ The parties hereto agree to promote employment of persons who have difficulties in asserting themselves in the labour market – such as applicants without qualification, school graduates without any practical experience, disabled persons, women with small children, Roma citizens, or persons who have been unemployed for a long period of time.

/18/ The parties hereto agree to pay special attention to the elimination of differences in remuneration of women and men, with the objective of improving the overall position of women in our society subject to the principles of non-discrimination and equality of opportunities.

FAMILY POLICY

1. The parties hereto agree to promote measures designed to result in improved functioning and stability of marriage and family, including relevant legislative acts.

2. The parties hereto agree to endeavour to create conditions such that parenthood and occupation are not in mutual contradiction. They shall seek to ensure better compatibility of professional and parental obligations so that parents may, in their discretion, make better use of their education and do not, at the time of maternity/paternity leave, lose contact with their profession and can, if they so wish, raise up their children to a greater extent.

3.The parties hereto agree to ensure adoption of a state family policy and ensure implementation of such policy by institutional means. On the basis of a broad professional and public discussion, to promote creation of a “National Programme of Support to Families with Children”, with an emphasis on the creation of favourable conditions for families with more than one child.

4. The parties hereto agree to introduce a well-balanced system based on the equilibrium of the following elements:

· child allowance as the right of the child, as a contribution of the society to the subsistence and education of children to which all children are entitled without any difference, payable in the same amount and differentiated only based on the age of the child; and school allowance paid in a single payment and differentiated based on the level of school education attained. Contractual parental allowance making possible family care for the youngest children, in an amount of at least one-third of the average employment income of people in the category of 25 to 35 years of age. The possibility of part-time gainful activity performed along with the taking of this allowance shall be extended,
· funding of the long-term needs of families with children in the various stages of life (e.g., loans to newly married couples, family saving schemes, trust funds etc.),
· changes to the tax system benefiting families with children (e.g., joint taxation of spouses, possibility of choice between child allowance and tax relief for children).

The structure of the whole system shall be considered in the light of the development of public budgets.

/19/ HOUSING

The parties hereto, being aware of the need for social acceptability, shall prepare and submit to the Parliament a draft bill on rent for flats to stipulate the regulatory rules and principles of rental payments usual in a particular location and the rules for service payments, and shall draft legislation regarding the housing allowance. Both parties hereto agree to extend the legislative basis for the development of construction of rental flats by not-for-profit legal entities and cooperatives, at the same time creating conditions for the construction of housing for low-income groups of the population. The parties hereto agree that they shall promote the so prepared proposals in both chambers of the Parliament.

1. The parties hereto have agreed that they shall introduce tax allowances for the procurement of first own housing.

2. The parties hereto have agreed that they shall alter the status of the State Housing Development Fund by utilizing its revolving functions, modern and more efficient loan facilities, and that the Fund shall be replenished by loan repayments to municipalities for municipal housing development funds.

3. The parties hereto have agreed to ensure through an amendment to the Civil Code that the rights and obligations of the parties to rental arrangements are mutually balanced.

4. The parties hereto have agreed that they shall promote the building of infrastructure for apartment housing developments and countryside housing.

5. The parties hereto have agreed on extending the investment incentives for the entry of potential investors to the housing development sector.

6. Encouragement of mortgages shall continue to be one of the tools of promotion of proprietary housing.

7. The parties hereto have agreed on preserving lower VAT rates on housing construction works.

8. Both parties hereto agree to look for tools to reduce the number of unoccupied flats and to eliminate the existing irregularities in the housing market.

/20/ HEALTH CARE

1. The parties hereto shall promote a modern democratic health care policy. They shall seek equity, professionalism, dignified treatment of the patient, good working conditions, financial stability, efficiency and control by the public. The parties hereto intend to further develop the public health insurance system based on the civic, cross-generational solidarity, solidarity of the healthy with the sick and disabled for the purpose of ensuring equal access to health care.

2. The parties hereto agree to strengthen the position of the patient by increasing his/her awareness and by encouraging his/her free choice of health care. The patient has the right to satisfy him/herself as to the standard of individual health care facilities and the right to public control of the quality of health care.

3. The parties hereto shall create statutory conditions for the full implementation of the principles set out in the Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine. Progress in the field of medicine and biomedicine research has far-reaching consequences for the future of the entire mankind. Therefore, the parties hereto shall encourage a broad public discussion regarding all of these issues.

4. The parties hereto, taking due note of the needs of the aging population, shall promote the restructuring of the existing capacities and shall improve in particular the standard of nursing care and other forms of long-term care, including rehabilitation and home care. The parties shall define those forms of long-term stay in relevant facilities that provide a de facto substitution for housing, and shall look for ways of co-financing such facilities. However, as regards hospitalisations, these shall be covered by public health insurance. Availability of indicated health care must not be disrupted.

5. The parties hereto shall promote implementation of the WHO’s Health For All in the 21^st Century programme. The parties shall emphasise the role of prevention with a demonstrable positive effect on the improvement of the population’s health.

6. The parties hereto shall ensure an efficient organisation of health care services, strengthening the role of regions and municipalities on the principle of subsidiarity. Highly specialised forms of care, including technological development, shall be planned and organised by the Ministry of Health so that health care is developed on the basis of objectively determined needs and economic resources and is available to all citizens throughout the Czech Republic.

7. The parties hereto shall prepare, as soon as practicable, a bill on health care facilities as public institutions, with an emphasis on the rules of their operation, economic management and supervision.

8. The parties hereto shall harmonise study programmes in the health care sector with the applicable EU requirements in order to enable mutual recognition of qualification.

9. It is the objective of our drugs policy to ensure availability of high-quality effective and safe medication to all those who need it. The parties hereto shall promote stabilisation of prices of drugs and shall integrate the amounts of payments such that the same are modified once per year.

10. The parties hereto shall not support any potential proposals involving increase of participation by citizens in respect of care covered by public health insurance. Based on broad professional consensus, the Ministry of Health shall propose standards for separate types and forms health care, including modifications of payments from the health insurance fund, depending on the development of the public health insurance sector.

11. The parties hereto shall not support any proposals regarding introduction of direct payments and fees payable by patients in respect of care covered by public health insurance.

12. The parties hereto shall prepare mechanisms for optimisation of the patient’s movement in search for health care, with an emphasis on responsibilities of both the patient and the doctor.

13. The parties hereto shall search for a way to limit unauthorised application of sickness insurance funds, e.g., by an effective interconnection of the sickness insurance and health insurance systems.

14. The parties hereto shall promote, for purposes of utilisation of insurance funds for health care, full redistribution of insurance premiums collected. In respect of especially costly health care, the parties shall establish an independently administered fund financed from health insurance and from the state budget.

15. The parties hereto shall not support any proposals concerning potential increase of the percentage rate of mandatory health insurance payable by employees and employers.

IV.

ECONOMIC DEVELOPMENT

/1/ The parties hereto agree to implement a joint national economic strategy designed to economic growth sustainable in the long term, with the goal of approximating developed countries in respect of the basic economic indicators.

The principal tools of this strategy shall include:

- promotion of investments to the production sector and services with high added value, including the development of a system of investment incentives for both local and foreign investors,
- support to small- and medium-sized businesses,
- support to research and development,
- support to export.

In this context, the parties hereto shall assess each of the ongoing public support programmes and, depending on the status of transformation of the national economy and on the process of accession of the Czech Republic to the European Union, the parties shall work to update the strategy.

/2/ The parties hereto agree to prepare and gradually implement a comprehensive plan of revitalisation of the Northern Moravia and North-western Bohemia regions. The plan shall be based on long-term investments by both the private and public sectors, development of the transport infrastructure, and preferential application of offset programmes and structural funds.

/3/ The parties hereto agree to amend the long-term energy policy. In choosing the applicable sources of energy, the parties shall focus on domestic sources while respecting the justified requirements concerning the environment and extending the utilisation of alternative and renewable sources of energy.

/4/ The parties hereto shall assess the status and results of privatisation of the network industries and shall consider further course of restructuring and privatisation with the objective of securing a competitive environment with gradual introduction of the choice of supplier, effective protection of the consumer’s interests while respecting social implications and environmental needs.

/5/ The parties hereto agree to create conditions for a maximum utilisation of the EU structural tools in preparation of programmes as well as in respect of participation of the Czech Republic in the financing of those programmes. Regional self-government authorities shall continue to be involved in the process.

/6/ The parties hereto shall preserve and further develop the system of support to small- and medium-sized businesses, with particular emphasis on the economically weaker regions.

/7/ Transport and communications

1. The parties hereto agree to promote at negotiations with EU with respect to the transport chapter an equal position of Czech carriers.

2. The parties hereto agree to promote development of transport infrastructure (highways, speedways, ring roads around urban areas, railway corridors, waterways, airports) with the use of permanent sources (taxes on fuels, highway tolls, road tax) as well as extraordinary sources (proceeds from privatisation and lease, preparatory EU-ISPA funds) and EU structural funds in the future.

3. The parties hereto agree to complete the transformation of Czech railways, with an emphasis on commercial and investment development.

4. The parties hereto agree to provide citizens with access to public transportation services to an adequate extent and in adequate quality and at acceptable cost.

5. The parties hereto agree to promote improvement of safety of road traffic, in particular by penalizing aggressiveness.

6. In the area of telecommunications, the parties hereto shall promote liberalisation of the telecommunications market and, at the same time, the strengthening of the powers of the independent regulator – the Czech Telecommunications Office.

/8/ Information society, building economy on ideas

The parties hereto deem as their common objective the promotion and development of information-based and knowledgeable society as an important tool for the development of learning, economy and public administration services. Therefore, the parties have agreed on the following principles of the information and communications policy:

1. The parties hereto have agreed that, in order for such objectives to be achieved, it shall be necessary to further develop the legal framework of the information-based society, in particular in the area of the telecommunications market, access to information, protection of personal data, and use of electronic documents and identifiers in public administration and in commerce.

2. The parties hereto believe that one of the means to achieve accessibility of information in the public sector includes the programme financing and management of the building of public administration information systems, as well as the bilaterally beneficial partnership of the public and private sectors.

3. The parties hereto believe that the accession to the European Union must be accompanied by a coordinated course of action in implementing the existing as well as any future regulations of the European Union concerning communication services and information technologies, not only by mere passive acceptance of such regulations but also by creative participation in their drafting.

/9/ Agriculture and development of rural areas

The parties hereto note that the fundamental objective in the area of agriculture is to optimise and stabilise the dimensions and economic position of agriculture so that it is capable to perform productive, environmental and social functions in the rural environment.

In pursuance of this objective, the parties hereto agree:

1. Through the "Countryside Revitalisation Programme", to encourage a harmonic development of rural areas, including regional and local specificities.

2. Through a system of subsidies and other measures, to enable fair competition of Czech farmers in the European competitive environment.

3. Finalise harmonisation of Czech laws required for the full-fledged entry of Czech agriculture to the European Union in the first wave.

4. To advocate production quota in respect of separate commodities as proposed in the position document and equal treatment in allocation of direct payments and resources for development of rural areas.

5. To support primary agricultural production in the production and marginal areas in accordance with the EU joint agricultural policy.

6. To support the food and processing industries in terms of the maximum safety of food products to the consumer.

7. To adopt measures designated to support agricultural exports.

8. To support primary agricultural producers in their associating in sales cooperatives and organisations.

9. To complete restitution and transformation processes in agriculture, restore and gradually stabilise ownership relationships in agriculture; to accelerate implementation of land adjustments and the process of sale of state-owned agricultural land; to use the agreed transition period for the transfer of agricultural land to Czech entities farming such land on acceptable terms and with the possibility of long-term repayment and agricultural land used as collateral. For purposes of achieving this goal, to establish a “land bank” or a similar institution.

10. To preserve versatile agriculture on the entire area of agricultural land with significant support to landscape and environment quality maintenance by environmentally endurable production; to encourage non-food utilisation of agricultural production and increase production of renewable sources of energy.

11. To continue water management policy safeguarding protection of land against floods and water erosion.

12. To continue to consider forests an important national asset, and to orient forestry towards permanent development of their productive and non-productive functions and improvement of their health condition.

13. To support progressive agricultural research and agricultural education system, with an emphasis on life-long education programme for farmers and introduction of new manufacturing technologies.

Development of agriculture and forestry has been and will remain the basis of prosperity of rural regions.

V.

SAFETY AND STRUGGLE AGAINST CRIME

/1/ The parties hereto agree to respect and promote strictly apolitical quality of the security corps of the Czech Republic and law enforcement authorities.

/2/ In the area of policing, the parties hereto shall promote involvement of the police in the operations of international security structures (Europol, Interpol).

/3/ The parties hereto recognise the necessity to support the operations of national police corps specializing in fighting the most serious forms of crime (organised crime, corruption, white-collar crime etc.).

/4/ The parties hereto agree to create conditions for harmonising territorial circuits of the police and courts with the territorial boundaries of regions, to improve cooperation of the Police of the Czech Republic with self-government bodies, and to increase the numbers of police officers directly on duty.

/5/ The parties hereto shall create conditions facilitating the possibilities for cutting off crime revenues and shall promote the ability of the state to confiscate the property of convicted criminals involved in organised crime where the convicted individuals are unable to demonstrate legal acquisition of such property.

/6/ The parties hereto agree to zero tolerance toward any expressions of extremism, racism and xenophobia. The parties hereto deem it critical to involve security corps in international struggle against terrorism and to focus in particular on the financing of terrorism, international exchange of information and trade in strategic materials.

/7/ The parties hereto agree to adopt effective measures to prevent illegal migration, illegal employment of foreigners, and any and all activities related to illegal migration, to stipulate the principles of the state’s migration policy respecting the rights and justified interests of individuals, at the same time taking account of each individual immigrant’s contribution to the benefit of the state, and agree further to intensify the struggle against smuggling with an emphasis on inter-ministerial coordination.

/8/ In the area of operations of intelligence services and the National Security Agency, the parties hereto perceive the need to conduct an analysis of the operations and, within the framework of the future reform to be carried out on the basis of consensus of the coalition parties, to improve their coordination, control and cooperation with the users.

/9/ The parties hereto consider elimination of corruption and consistent penalisation of serious economic criminality a principal task of the whole society. To this end, the parties agree to put through a number of measures oriented, without limitation, toward:

- accelerated decision-making of authorities and courts,
- simplification of administrative procedures and elimination of redundant bureaucracy,
- making public decision-making transparent.

/10/ For this purpose, the parties hereto shall promote, inter alia, the adoption of legislation embodying, to a specified extent, the transition from cash payments to non-cash payments.

/11/ The parties hereto shall present an appropriate draft bill on statements of property and demonstration of origin of income for purposes of increased penalisation of serious crimes against property and serious tax indiscipline etc.

/12/ The parties hereto agree to draft new legislation in respect of conflicts of interests intended to extend the existing scope of powers and tighten the applicable sanctions, and to impose the obligation to file the statement of property on certain public officials.

/13/ The parties hereto further wish to proceed with implementation of the objectives contained in the currently effective governmental programme of struggle against corruption. As to public procurement, the parties shall prefer public tenders over other forms of procurement, in particular over invitation to a single party, both on the governmental level and at separate ministries.

/14/ As to the retail sector, the parties hereto shall promote measures designed to prevent curtailment of receipts. In this context, the parties shall consider, for instance, introducing cash registers, registered receipts etc.

VI.

SUPPORT OF EDUCATION, SCIENCE, CULTURE AND SPORTS

1. The parties hereto consider education as their priority and shall endeavour to further increase expenses related to education in future budgets.

2. The parties hereto agree to:

a) rely in further transformation on the principles of the National Education Program in the Czech Republic (the “White Paper”);

b) draft and promptly enact the Act on Education (the School Act) and seek the broadest possible support for the act from the professional public and other parliamentary parties;

c) preserve free public primary, secondary and higher education system, with an emphasis on continuous improvement of the educational standard of the Czech population;

d) preserve comparable status of schools of all founders;

e) respect the multicultural and multiethnic nature of the Czech society; provide equal opportunities for education to members of each ethnic minority;

f) seek the improvement of working conditions of pedagogues, and continue to raise their salaries with the objective of significantly exceeding the average salary in the Czech Republic;

g) create conditions for substantial extension of study opportunities in the area of tertiary education;

h) universally promote conditions for development of leisure activities of children and the youth and development of sports;

i) implement strategic goals of the State Information Policy in Education.

3. The parties hereto agree to encourage basic and applied research such that the public funds expended in this respect become continuously increased.

4. The parties hereto agree to:

a) earmark for the support of culture – including the cultures of ethnic minorities – funds in an amount customary in EU, but as a minimum requirement to adhere to the average expenditures made in culture in 1998-2002;

b) promote increase of the state care of cultural heritage and cultural development;

c) preserve the public status of the Czech Radio, both programmes of the Czech Television, and the Czech Press Agency;

d) assess the hitherto activities of public media, and in particular of their respective councils, with an emphasis on the requirement of impartiality, balance, and performance of public service;

e) take steps necessary for the meeting of such requirements (and indispensable for successful integration of the Czech Republic to EU), including amendments to acts on public mass media. The parties hereto shall apply a similar procedure in respect of the Council for Radio and Television Broadcasting, including amendment to the relevant act.

VII.

DEMOCRATIC RULE-OF-LAW STATE, PUBLIC ADMINISTRATION AND CIVIC SOCIETY

/1/ The parties hereto consider the efforts towards establishment of a democratic rule-of-law state as their permanent goal, the achievement whereof requires embodiment in the constitutional order of the Czech Republic of the ability of citizens to decide on the principal matters of the country’s home and foreign policy by means of referendum. The parties declare their joint intention to support in the Senate, by votes of their respective Senate groups, the deliberated draft constitutional bill on referendum. If the draft bill fails to be adopted, the parties agree to promptly prepare and submit a new draft constitutional bill on general referendum, including referendum on accession to EU. The parties believe that the next necessary step is to amend the Constitution of the Czech Republic to permit direct election of the President of the Republic, clarify mutual powers of constitutional bodies, restrict the scope of immunities of constitutional officials, and establish supervisory powers of the Supreme Audit Office in respect of economic management of state funds by territorial self government units.

/2/ In the interest of strengthening stability of the country’s legislation, its transparency and guarantees of legal security, the parties hereto agree to proceed to principal recodification of law consisting in the drafting of new civil, labour and penal codes so that the same can be submitted to the Parliament by the end of June 2004 at the latest. The parties hereto further agree to submit to the Parliament, by the end of June 2003 at the latest, an overall recodification of the bankruptcy law. At the same time, the parties hereto declare their joint intention to resume the overall revision of law intended to eliminate obsolete regulations and to enhance the legal security of the population.

/3/ The parties hereto note that laws have been enacted in Czechoslovakia after November 1989 and in the Czech Republic after 1 January 1993 intended to mitigate property and other injustice of the former regime to an extent not seen in any other post-communist country. The parties jointly agree not to extend the framework of such restitutions and not to permit the change of 25 February 1948 as the date relevant for the filing of any restitution claims.

/4/ The parties hereto deem it important to continue to investigate and punish the crimes of communism in compliance with the applicable laws as currently in effect.

/5/ Both parties hereto continue to regard as open the principal issue of settlement of property relationship between the state, on the one hand, and churches and religious societies on the other hand. In connection with negotiations regarding this issue and with the preparation and review of the required legislative acts, the parties agree to use as common basis the principle of a property fund whose proceeds will be distributed exclusively to support churches and religious societies. Depending on the amounts of such proceeds and depending further on the creation of additional options for financing churches from other sources, the financing of churches from the state budget shall be terminated.

/6/ The parties hereto agree to proceed with the reform of the judicial system for the purpose of improving enforceability of law and raising the professional standard of judges, along with strengthening the administrative background of courts and establishing the position of assistant judges.

/7/ The parties hereto agree, with the objective of facilitating the right to fair trial, to draft and submit to the Parliament of the Czech Republic a bill on legal aid.

/8/ The parties hereto shall promote such modifications of court proceedings as will improve the position of creditors vis-à-vis debtors, in particular by amending the Act on Court Fees.

/9/ The parties hereto shall draft a legal framework ensuring acceleration of registration in the Commercial Register. In the first instance, these proceedings shall not be the responsibility of courts, the terms and conditions for registration shall be simplified, and a system of application forms shall be introduced.

/10/ The parties hereto agree to do any and all things to ensure that the Czech Republic ratifies the Rome Statute of the International Criminal Court.

/11/ The parties hereto view as their priority the completion of the overall reform of public administration based on the self-government principle. The parties shall not take in either of the Parliament chambers any action that could jeopardise finalisation of stage II of the reform as of 1 January 2003. The public administration reform shall be completed by stage III that shall be focused in particular on the best possible efficiency of operations of central and administrative authorities, revision of administrative duties, and simplification of administrative procedures. The parties agree to submit to the Parliament of the Czech Republic and to promote in both chambers a new bill on administrative procedure to serve as the universal procedural regulation governing the area of public administration.

/12/ The parties hereto agree to support development of a civic society and its participation in administration of public affairs. The parties shall seek to create the best conditions for equal opportunities of the non-profit sector in provision of generally beneficial services, especially in social area and in respect of health care, environment and culture.

/13/ We shall amend the system of funding the non-profit sector by the state. We shall create conditions necessary for the development of plurality of funding sources available to non-governmental not-for-profit organisations.

/14/ The parties hereto agree to ensure that source documentation required for important social decisions is prepared upon consultation with the best available experts, wherever employed and whatever their orientation, and in dialogue with citizens and their organisations, including, without limitation, churches and religious societies. This applies to specific policies and to legislative, executive and other decisions made in a coordinated manner on the basis of such policies.

VIII.

PUBLIC FINANCES AND TAXES

/1/ The parties hereto deem consolidation of public finances an indispensable precondition for sustainable medium-term economic growth and for a successful completion of the process designed to result in a speedy accession to the European Union and the subsequent meeting of the criteria for introducing the European unified currency, Euro. The ultimate objective of these efforts should be a system of public budgets that is well balanced in the long run. Both parties hereto believe that, in order to be able to achieve this goal, it will be inevitable to prepare and launch a reform of the public finance system in 2003 – 2006 so that the balance in public budgets in 2006 does not exceed 4.9 – 5.4 per cent of the gross domestic product, provided that the projected balance amount shall be updated in connection with the approved medium-term fiscal prognosis pursuant to the next paragraph.

/2/ The parties hereto agree that the Government approve by the end of 2002 a medium-term fiscal prognosis to determine binding framework limits for expenditures relative to state budget chapters for the entire term of office of the new Government. The reform of the public finance system should be based on a combination of measures on both the revenue and the expenditure sides of public budgets, on governmental policy of stabilisation and, from 2005, gradual reduction of the share of the state budget balance in GDP, on a tax reform, pension scheme reform, and achievement of a stable distribution of expenditure authorisations among the state, regions and municipalities. State expenditures must continue to be economical, frugal and prudent. The public finance reform must not in the long run lead to endangering the quality of operation of the public sector and public services, to disruption of social consensus and social cohesion.

/3/ The parties hereto shall complete the transfer of expenditure authorisations to regions and municipalities so that they correspond with transferred authorisations in the area of exercise of public administration and public services. On or before 1 January 2004, the extent of participation of regions in determining their respective budgets shall become increased so that regions are able to economically and efficiently perform the functions vested in them by law. Such legislative measures shall be adopted as shall create the framework for regulation of indebtedness of municipalities and regions while respecting their budgeting autonomy.

/4/ The parties hereto agree not to increase in the next four-year period the total tax burden and to stabilise the tax quota on the 2000 level, including implementation of measures to prevent its potential future autonomous decrease. Both parties hereto at the same time agree to complete harmonisation of the tax system with the requirements of the European Union and to reduce the rate of the corporate income tax.

/5/ The parties hereto agree to create the best possible legislative and other conditions for the struggle against tax and customs evasions and related economic crime.

/6/ The parties hereto shall seek an efficient, speedy and transparent settlement of the assets accumulated by the Czech Consolidation Agency.

IX.

PERMANENTLY SUSTAINABLE DEVELOPMENT AND PROTECTION OF ENVIRONMENT

/1/ The parties hereto note that they shall promote preservation and improvement of participation of the public in protection of the environment, and agree further to promote in the Parliament of the Czech Republic the ratification of the Aarhus Convention on public participation in decision-making in environmental matters.

/2/ The parties hereto agree to submit to the Parliament of the Czech Republic and to seek adoption of laws governing the individual national parks and excluding the possibility of any territorial curtailment of such parks – the boundaries of the parks will correspond with the current status quo. The proposed laws shall not permit the transfer of management of protected landscape areas and national parks to the powers of regions. Accordingly, the parties hereto agree not to permit transfers of forests managed by the state enterprise Lesy ČR [Forests of the Czech Republic] to regions, and to retain state ownership of such forests.

/3/ The parties hereto agree to promote the governmental amendment to the Act on Protection of Nature and Landscape, applying the requirements of the European system of protected areas “NATURA 2000”, including the corresponding procurement of funds for the owners taking care of the land in question. In respect of the nationally significant protected areas and NATURA 2000 system, the parties agree to provide for unified and locally implemented special state administration related to protection of nature and landscape. In compliance with the State Nature and Landscape Protection Programme, the parties agree to make additions to the system of protected areas, including in particular Protected Landscape Areas of Novohradské hory, Český les and Střední Poohří.

/4/ The parties hereto have agreed that the Government shall, without undue delay, commence preparations for a fiscally neutral environmental tax reform. Furthermore, both parties hereto shall make more transparent the governmental policy of subsidies to the policy of environmental protection and shall support development of promising environmental technologies.

/5/ The parties hereto agree to achieve, through an amendment to the Act on the National Property Fund, the transfer of CZK 15 billion to the State Environmental Fund where the monies will be applied towards revitalisation of areas disrupted by extraction of brown coal.

X.

FOREIGN AND DEFENCE POLICY

/1/ The common objective of the parties hereto shall be an active and well-balanced foreign policy. The priority of the Czech Republic’s foreign policy is integration of the Czech Republic into the European Union, development of good relationships with all neighbouring countries, and fulfilment of obligations toward our allies in NATO.

/2/ We intend to base our relationships with other countries on the principles of partnership, equality, mutual respect and cooperation with all who wish to participate in creating fair and democratic relations in the world.

/3/ The parties hereto rely on the Czech-German declaration of 1997 and agree to respect the principles expressed in Resolution of the Chamber of Deputies No. 2235 dated 24 April 2002, referring to the legal consequences of World War II.

/4/ The parties hereto agree to support a joint European foreign and security policy, including the project of joint European multinational forces. We shall develop cooperation within the framework of the Visegrad group, above-standard relationship with the Slovak Republic, and participate in struggle against international terrorism. To us, this struggle includes support provided to third-world countries and enforcement of protection of human rights. We shall ascribe great importance to the economic dimension of foreign relations.

/5/ The parties hereto have agreed that they shall provide for the security of the Czech Republic and shall develop the country’s defensive capabilities in response to new security challenges.

/6/ The parties hereto shall pay primary attention to further integration and development of Czech Republic’s membership in NATO, and shall support political and military integration of the Czech Republic into EU security structures.

/7/ The parties hereto shall implement a principal reform of armed forces and shall build a fully professional army. By 2006, compulsory military service shall be abolished.

/8/ The parties hereto shall promote joint course of action against international terrorism and shall support active involvement of the Czech Republic in anti-terrorist operations, peace-enforcement operations, and humanitarian operations.

/9/ The parties hereto agree to complete the process of securing the Czech Republic’s airspace by national means.

Dated at Prague on 9 July 2002

Vladimír Špidla
Cyril Svoboda
Ivan Pilip

Stanislav Gross
Milan Šimonovský
Pavel Pešek