* Fitch warns of debt spike in Czech, Poland, Hungary
* Polish public debt seen at 56 pct/GDP in 2010
* Hungarian debt seen at 83 pct/GDP, Czech 41 pct/GDP
* Fitch says elections across region raise risks
By Michael Winfrey
PRAGUE, Sept 21 (Reuters) - The economic crisis will cause a
jump in public debt levels in Poland, the Czech Republic and
Hungary by 2010 and could lead to negative rating moves if they
fail to address the problem, agency Fitch said on Monday.
The Czech and Hungarian economies have contracted sharply
this year and Poland, the European Union's largest ex-communist
member, is expected to eke out growth of only around 1 percent
this year, a steep slowdown from growth of 4.9 percent in 2008.
The result has been a sharp fall in tax revenues and a spike
in social spending due to rising unemployment across the region,
which has forced budget deficits to jump and public debt levels
to rise dramatically.
Fitch said in a report it expected Poland's public debt to
jump past the level of 55 percent of gross domestic product that
will trigger automatic spending cuts, and it said elections in
all three countries posed a risk to state finances.
"The marked deterioration in public finances in these
countries could lead to negative rating actions if they fail to
identify and implement credible medium-term fiscal consolidation
programmes," said Fitch sovereign team Director David Heslam.
"In all three countries, politics and electoral cycles add
to the risk of fiscal slippage."
DEBT RISING
Fitch forecast the Czech general government deficit at 6
percent of GDP in 2009 and 2010, quadruple last year's deficit
of 1.4 percent. It said that could rise past 7 percent next year
unless the 2010 draft budget law is changed.
Fitch said government debt to GDP would rise by 10.9
percentage points between 2008 and 2010 to 40.8 percent.
"Uncertainties related to the timing of general elections,
the final size of the 2010 deficit target and ability of the
next government to tighten fiscal policy constitute risks to the
medium term budget outlook," Fitch said.
An interim government in the Czech Republic is pushing to
slash its planned 2010 budget deficit of 230 billion crowns by
about a third. The leftist Social Democrats and other parties
have baulked at belt-tightening ahead of elections expected next
June, although analysts expect them to come to a compromise.
Fitch said Hungary's government debt would rise 10
percentage points to 82.5 percent of GDP by end 2010.
And it forecast Poland's debt ratio to rise to 56.3 percent
of GDP, up by 9.1 percentage points from 2008. It said that
depended on a privatisation programme the government hopes will
garner 35 billion zlotys this year and next.
Fitch's estimates for Poland's general government deficit
are lower than the market consensus but the agency said a
shortfall of 5.5 percent this year and 6.3 percent in 2010 meant
the country's plans to adopt the euro would be delayed past
2013.
Prime Minister Donald Tusk's cabinet has resisted tax hikes
or steep budget cuts ahead of a 2010 presidential election in
which he is expected to run. A general vote will then follow.
"A heavy election schedule, with presidential elections due
in 2010 and general elections in 2011, add to the risks for the
medium-term budget outlook" Fitch said.
Last week, a deputy finance minister said that if an
emerging economic rebound lasts, Poland would be able to slash
its budget deficit in 2012 to 3 percent of GDP, the level all
new EU members must reach to join the euro.
Fitch rates the Czech Republic's for long-term foreign
currency issuer default ratings at A+, stable and local currency
at AA-, stable. It puts Hungary at BBB negative and BBB+
negative and Poland at A- stable and A stable.
(Reporting by Michael Winfrey; Editing by Victoria main)
