UPDATE 1-Czech eurobond still possible in 2007 -Dep FinMin

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PRAGUE, April 11 (Reuters) - The Czech Republic may still decide to issue a eurobond in 2007 as the local market has become saturated with growing state debt issuance, Deputy Finance Minister Eduard Janota said on Wednesday.

"The overhang of demand over supply in (state bonds) on the local market has decreased recently, which suggests that the market is becoming saturated," Janota said.

"No decision on the basic parameters of such an (external debt) issue have been made," he said, adding that any foreign issuance will mean a lowering of domestic issuance.

The European Union member country, rated 'A-' by Standard & Poor's, raised 2.5 billion euros through 10-year and 15-year benchmark Eurobond issues in 2004-2005 but did not tap the public foreign debt markets last year.

He said that the government's target of a public fiscal gap of 4 percent of gross domestic product this year could be breached if tax revenues lag the current plan and spending increases because of tapping government reserve funds.

"The (2007) deficit will be rather above 4 percent of GDP ... There is a risk of a higher deficit in the case that contributions to the reserve funds are lower than what is drawn," he said. "Also the tax revenue projections are tight and tax collection targets are unlikely to be exceeded as they were in previous years."