(Updates with link to video of interview)
* Czech govt aims to cut budget gap to below 4.4 pct/GDP
* Govt to continue reforms despite deep fall in popularity
* PM says belt-tightening reforms should not impact growth
* Says pact for euro "a mistake", Czechs won't join
By Michael Winfrey and Jana Mlcochova
PRAGUE, March 18 (Reuters) - The centre-right Czech
government will cut its 2011 budget deficit more than planned
and will push on with tough belt-tightening measures despite a
fall in popularity, Prime Minister Petr Necas said on Friday.
The austerity minded leader of the right-of-centre Civic
Democrats said the government would try to cut the deficit to at
least 4.4 percent of GDP, better than its 4.6 percent target.
The government's zeal for belt-tightening often puts it on
the same side as euro zone heavyweight Germany, but Necas said
the Czechs would not follow the Berlin-backed "Pact for the
Euro" at a March 24 European Union summit.
He added the decision to approve the pact without inviting
non-euro zone states to the table had been a mistake. The pact
calls for fiscal stabilising measures.
"We do not count on participating in this pact at the
moment. One reason is that we were not invited to the
negotiations on March 11," he said from the government office,
overlooking the Vltava river and Prague's Charles Bridge.
"Historically, the Czechs are suspicious when there are
talks 'about us, without us'," he added, invoking a phrase often
used to refer to Germany's annexation of former Czechoslovakia
in 1939, an act bitterly resented by Czechs who felt betrayed
when Britain and France refused to step in.
Necas said the country of 10.5 million would pursue parts of
the pact -- including enshrining a public debt ceiling in law
and reforming the pension system -- on its own.
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For a profile on Necas: []
For a Take A Look on Czech pension reforms: []
For highlights of the interview: []
For video link to interview
http://link.reuters.com/wed68r
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But his government disagreed with other elements of the
agreement such as the harmonisation of corporate taxes, and was
affronted by the fact that the Czechs had been invited to join
only after it had been hammered out by euro zone countries.
"I consider it a mistake to exclude part of the member
countries from decision-making on things that will impact all of
them," he said.
FIRM ON AUSTERITY
Necas took the reins of the scandal-plagued Civic Democrats
after the last government it led collapsed during the Czechs'
stint at the rotating EU presidency in 2009, an embarrassing
blow to a country wary of deeper integration with the bloc.
Known as "Mr. Clean" for his public image of high moral
standards and an absence of scandals, the tall, friendly father
of four is seen as less divisive than previous party leaders
Mirek Topolanek and eurosceptic President Vaclav Klaus.
He has pledged to lead a "government of budget
responsibility" that has slashed its public spending deficit
from 5.8 percent of GDP at the height of the crisis in 2009 to
4.8 percent last year.
That result was better than the government's target of 5.3
percent, and Necas said it would try to repeat that this year.
"It is one of our fundamental tasks to be better than our
original target so it is the reason why we would like to be
under 4.4 percent of GDP," he said.
The government's reforms include a 10 percent cut to the
total public sector wage bill that has angered police, firemen,
and government clerks, as well as pushing for a new private
savings element to augment the state pay-as-you-go pension plan
that has also led to tax hikes to finance it.
The moves have hit his government's popularity. While 64
percent of Czechs supported his cabinet after an election last
May, that fell to 30 percent in February, a poll showed. Necas
said he was not concerned and would continue with the reforms.
"It is the political price that I was ready for and it does
not surprise me," Necas said. "In fact, popularity is a
secondary question for me now, with no election coming up."
He said that because the Czech economy was mainly driven by
exports, rather than domestic demand, he did not think the
reforms would hit growth, despite the central bank's warning
that it was suppressing domestic demand.
He added that the government had decided not to pursue an
earlier idea of financing pension reform with revenues from
selling state-owned assets.
"In many countries around us, governments have diverted part
of the money to private funds without worrying how to cover the
gap," Necas said. "Today they are getting in to huge problems,
in Hungary, Poland, and also in Slovakia. We are not going this
way. We have been responsible from the very beginning."
(Reporting by Michael Winfrey, editing by Paul Carrel/Ruth
Pitchford)
