(Refiles to add link to table of opinion poll results)
* Social Democrats have no plans for big spending cuts
* Euro adoption seen by 2016
* No plans to reform pension system
By Robert Mueller
PRAGUE, April 16 (Reuters) - The Social Democrats, the main
Czech leftist party and likely winner of next month's election,
will cut the budget deficit below 3 percent of GDP by 2013 from
almost twice that last year with tax hikes and not big spending
cuts, deputy chairman Bohuslav Sobotka told Reuters on Friday.
The general election at the end of May will replace the one
year old non-partisan caretaker government with a government
with a mandate to conduct needed reforms.
The Social Democrats, who prefer to cut the deficit by
taxing the wealthy and companies rather than curbing generous
welfare benefits, are ahead in the opinion polls but are almost
sure to fall short of a majority, polls indicate.
A poll on Tuesday showed the Social Democrats with 27
percent of the vote, down from 34.5 percent in February, and the
right wing Civic Democrats on 21.2 percent, up 0.5 percent.
Some surveys suggest the right-wing and centrist parties
stand a chance of forming a majority coalition.
Sobotka, 38, the Social Democrat's most likely candidate to
be Finance Minister, said his party planned a number of tax
hikes to cut the deficit to the EU-prescribed 3 percent of GDP
level.
"The target is to have the deficit below 3 percent by
2013... so that a way is open to adopt the European common
currency in 2015-1016," Sobotka said.
The Social Democrats want to raise budget revenues by 70
billion crowns ($2.21 billion) with a number of measures
including reinstating progressive taxation and hiking corporate
income tax to 21 percent from 19 percent.
NO CUTS
The Czechs ran budget deficits even during the years of
record economic growth prior to the global financial crisis and
the country's ageing population is straining the pension and
health systems. A generous welfare policy has led to abuse.
Last year the public sector deficit hit 5.9 percent of GDP,
the fourth biggest record, as the economy contracted by 4.1
percent.
The Social Democrats do not plan any cuts in welfare
spending and say the pension system, based on a pay-as-you-go
principle, requires no change even with an increasingly ageing
population.
Sobtoka said he was concerned a reform would lead to a
drop-out in the budget revenue because people would send part of
their contributions to private pension funds.
Recommendations made by the Organisation for Economic
Cooperation and Development (OECD) mostly ran against the Social
Democrats' plans.
The Czechs were urged to cut the budget deficit mainly by
cutting expenditure and increased revenues should be sought from
indirect taxes rather than levies on labour and capital income,
it said. []
"International institutions give us varying recommendations,
the IMF said that a moderate rise in corporate income tax and
strengthening of progressive taxation was not a problem,"
Sobotka said.
Investors continue to see Czech assets as a relatively safe
bet thanks to the country's low debt, forecast at around 40
percent of GDP this year. But they are waiting to see how the
new administration tackles reforms.
Rating agency Moody's warned on Thursday the Czech
Republic's A1 ratings were constrained by concerns over the
government's ability to pursue reforms.
Five-year credit default swaps (CDS) <CZGV5YUSAC=R>, a
measure of a country's cost of borrowing, were at 68.3 points on
Friday, about double the German level, but a fraction of
corresponding Greek CDS's at 420.5 points.
(Writing by Jana Mlcochova; editing by Ian Jones)
For table of latest opinion polls click on []
