By Jan Lopatka
PRAGUE, March 2 (Reuters) - The Czech Republic will hold a
general election on May 28-29 that looks likely to bring the
centre-left Social Democrats to power after a four year hiatus,
handing them the task of slashing a crisis-inflated budget
deficit.
The election could break a deadlock that has crippled
policymaking in the central European country since an election
produced a hung parliament in 2006.
Analysts doubt the party, if it wins, will be able to stick
to its declared target of cutting the budget gap to 3 percent in
2013, from about 6.6 percent last year, which is crucial to
controlling ballooning public debt and meeting the country's
goal of adopting the euro in 2015.
Here are selected issues to look for in the election.
For an ANALYSIS on the vote, click []
VOTE RESULTS AND COALITIONS
The Czechs have not had a government with a clear majority
for over a decade and vote results tend to be close, leading to
weak governments and frequent policy deadlocks.
The Social Democrats hold a 5-13 percentage point lead over
their main rivals, the centre-right Civic Democrats, but will
almost certainly need coalition partners to control a majority
of parliament's 200 seats. []
Their preferred partner would be a centrist party, such as
the Christian Democrats. They could also work with the Greens or
the small liberal Public Affairs party.
The Social Democrats could also form a minority government
backed by the Communists, a party deemed unacceptable by most in
the political spectrum.
A close result could lead to a grand coalition of the two
biggest parties, the Civic Democrats and the Social Democrats, a
development analysts say could hamper decisive reforms.
What to watch:
-- Possibility of weak minority or small majority government
-- Ties between small centrist parties and bigger parties
-- If small parties pass 5 percent threshold for parliament
FISCAL POLICIES
The Social Democrats have pledged to hike taxes on firms and
higher wage earners to cut the budget gap to 3 percent in 2013
but promise a generous welfare agenda.
Analysts say the changes will not be enough to help balance
a budget that faces pressures from the financial crisis -- the
economy shrank by 4 percent in 2009 -- and more importantly is
weighed down by long-neglected structural problems.
The International Monetary Fund has warned Prague must
reform pension, health and welfare systems, and reforms should
focus on restraining spending. []
Latest IMF assessment:
http://www.imf.org/external/np/ms/2010/012510.htm
Latest budget figures: []
The Civic Democrats have said they would raise value-added
tax rather than give up the current flat personal rate income
tax and have also promised to cut the budget deficit to 3
percent by 2012 for potential euro adoption in 2015.
Analysts say fiscal tightening is key to taming the growing
debt pile, which is expected to reach 40 percent of GDP, up from
29 percent in two years but still only half of the EU average.
What to watch:
-- Coalition partners may ease back on tax hike plans
-- Social Democrats may back off from euro entry target
-- 2011 budget will define speed of fiscal consolidation
ENERGY POLICIES
Power firm CEZ <>, central Europe's biggest company
with market capitalisation of $25 billion and the second biggest
European power exporter, is 69 percent state owned and a
significant source of government revenue in taxes and dividends.
The Social Democrats have said they would raise dividend
payments to fund a one-off bonus to pensioners.
CEZ is also running the biggest tender in the country's
history to order up to five nuclear power station units.
The government will play a crucial role in the deal,
estimated by Czech media as worth 500 billion crowns ($26.16
billion), and may influence which of three bidders -- Areva SA
<CEPFi.PA>, Westinghouse Electric, a unit of Toshiba Corp
<6502.T> and Russia's Atomstroyexport -- will win the project.
What to watch:
-- Proposals for special CEZ dividends
-- Political involvement in CEZ tender
(Editing by Michael Winfrey and Jon Boyle)
