Czech finmin eyes CZK 153.2 bln in 2010 state bonds-Website

                                
 By Michael Winfrey
                                
 PRAGUE, Jan 2 (Reuters) - The Czech Finance Ministry plans
to borrow about half of its estimated record financing needs
this year through state bonds to help cover an expected fiscal
deficit of 162.7 billion crowns ($8.83 billion).
                                
 Public finances have emerged as the main battleground ahead
of an expected May parliamentary election, with leftist parties
pushing for more spending to ease the pain of economic crisis
against warnings of long-term consequences from the right.
                                
 The EU member of 10.5 million has approved a budget gap of
5.7 percent of gross domestic product for this year, easing from
an estimated 6.6 percent in 2009 but a figure the interim
cabinet and right-of-centre parties say is still too high.
                                
 The ministry said on its Website it would propose issuing
153.2 billion crowns ($8.32 billion) in state bonds this year to
help cover the planned fiscal deficit in a draft law at a
government meeting on Monday. 
                                
 If approved, it would cover over half of up to 292 billion
crowns the ministry has forecast for 2010 borrowing. In
December, the ministry said it could borrow up to 140 billion
crowns on foreign markets.
                                
 The Finance Ministry estimates gross borrowing needs will
gradually increase to about 313 billion crowns in 2012 as budget
gaps stagnate at high levels and debt maintenance costs rise.
                                
 Economists say if efforts are not made quickly to rein in
public finances, it could take years for the small and open
central European economy to claw back to a deficit ceiling of 3
percent of GDP level required to join the euro zone.
                                
 In a crisis that has seen budget gaps spike to double digits
in the United States, and some EU states, the Czechs have seen
their expected 4 percent economic contraction in 2009 hammer
budget revenues and drive up social spending, with the 2009
public deficit tripling over original plans.
                                
 Unlike fellow EU members Romania and Hungary, they have not
needed rescue aid from the International Monetary Fund and have
fared about as well on the fiscal side as Poland, the only EU
state to avoid economic contraction this year.
                                
 Many economists here say that, because the economy is
dependent on exports, raising spending through fiscal stimulus
will not do much to produce growth and the country's car and
electronics plants must wait for a revival in their main market,
the euro zone, for themselves to recover.
                                
 Adhering to the fiscally-prudent line endorsed by
right-of-centre parties, Prime Minister Jan Fischer's caretaker
government has pushed through a $4 billion package of tax hikes
and spending cuts to rein in the shortfall.
                                
 But the leftist Social Democrats, who lead opinion polls
ahead of the parliamentary ballot, approved 12 billion crowns in
extra spending in a last minute change to the 2010 budget law
last month, deepening the political confrontation over the best
way out of the crisis.
                                
 Czech bonds have been boosted since the middle of last year.
The yield on the 10-year <CZ1002471-> has fallen almost two
percentage points to around 4 percent since the middle of 2009.
  (Reporting by Michael Winfrey; Editing by Ron Askew)