* Three-party coalition has strong majority in lower house
* 2011 budget next important task
* S&P raises country's outlook to positive on fiscal plans
(Updates with vote delay, analyst, S&P)
By Jason Hovet and Robert Mueller
PRAGUE, Aug 10 (Reuters) - The new centre-right Czech
government looks certain to win a confidence vote in the lower
house, clearing an early hurdle as it seeks to push tough budget
cuts and reforms through parliament.
Lawmakers opened debate on the three-party coalition on
Tuesday, but a vote that had been expected in the evening was
now not likely to come before Wednesday.
The government aims to deliver on an election promise to
slash spending and improve a fiscal position analysts say is
already among the best in central Europe.
That has made Czech government bonds and the crown safe
havens in a volatile region.
Standard & Poor's ratings agency raised its outlook for the
European Union member to positive on Tuesday, reflecting what it
said was the likelihood of an upgrade in the next two years if
the new government implemented its fiscal plans. []
But the coalition must balance a 10 percent cut to the
public wage bill and lower welfare benefits with an unemployment
rate of 8.7 percent and worries that belt tightening may stifle
an export-led recovery that has largely bypassed consumers.
The right-of-centre Civic Democrats, the conservative TOP09
and centrist Public Affairs have the largest majority of any
government since the creation of the Czech Republic in 1993
after winning 118 seats in the 200-member lower house in May.
While the coalition has run into a minor dispute over which
ministries will face the largest budget cuts, analysts say Prime
Minister Petr Necas' government will easily win the vote, a
constitutional requirement to stay in power. []
Charles University political analyst Petr Just said a
situation where coalition partners were so close on issues while
holding a strong majority was exceptional in Czech politics, but
added coalition cracks would remain a reality.
"These cracks will always appear," Just said. "(But) none of
the three parties want the government to be crowded out by the
(opposition) Social Democrats or the need for early elections."
BELT TIGHTENING
Clawing its way out of a 4.0 percent economic contraction
last year, the government expects 2010 growth of 1.6 percent.
The next major task will be drawing up a 2011 budget, in
which the coalition aims to cut the fiscal deficit to 4.6
percent of gross domestic product from 5.3 percent this year.
The government aims to hit the EU's 3 percent fiscal deficit
ceiling by 2013, while keeping in check an overall public debt
burden of around 38 percent of GDP -- about half the EU average.
Standard & Poor's said the country's political commitment to
fiscal measures, including plans to tackle financing of a
pension system whose debt is set to grow with an ageing
population, was "significantly higher than in the past".
"The positive outlook reflects the likelihood of an upgrade
if the government legislates social security reform that lessens
ageing-related expenditure pressures," S&P said.
Prague's cost cutting contrasts with other countries in
central Europe. In Poland, tough reforms are likely to be put
off until after an election next year while the new Hungarian
government, defying the IMF and the EU, is looking to soften
next year's budget goal. []
The government's commitment to austerity has been partly
behind the crown's <EURCZK=> rise to 21-month peaks against the
euro this month, while the benchmark 9-year bond <CZ1002471=>
yield has dropped to a lifetime low.
(additional reporting by Jan Korselt; editing by Paul Taylor)
