Bloomberg News

Czech Cabinet Faces Budget Risk on Smaller Majority, Fitch Says

May 02, 2012

The Czech government’s reduced majority following a breakup of the ruling coalition may make it harder to meet plans to cut the budget deficit, Fitch Ratings said.

April political events, in which the three-party coalition disintegrated and the government won a confidence vote in parliament, “do not in themselves have any implications” for the country’s A+ rating with a stable outlook, Fitch said in an e-mailed statement today. Premier Petr Necas’s Cabinet won backing for its austerity plans from lawmakers that split from the smallest member of the original coalition.

Necas is keeping his 20-month-old Cabinet in power as governments crumble across Europe amid German Chancellor Angela Merkel’s push for austerity to prevent the euro area from breaking up. The breakup of the Czech coalition followed clashes over spending cuts and personnel issues as the Cabinet prepares bills to cut the budget deficit to less than the European Union’s limit of 3 percent of gross domestic product.

“The government’s smaller majority could make it harder to deliver on its fiscal tightening plans, which envisage tax increases and further spending cuts bringing the deficit below 3 percent of GDP in 2013,” Fitch said.

Necas’s original administration, assembled after May 2010 elections, had 118 mandates in the 200-seat lower house of parliament. His Civic Democrats now have 51 seats, while the TOP09 party holds 41 mandates. The government secured support from 13 lawmakers outside the government parties in the April 27 confidence vote.

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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