* Three-party coalition has strong majority in lower house
* 2011 budget next important task, coalition unity risk
* S&P raises country's outlook to positive on fiscal plans
(Updates with vote)
By Jason Hovet and Roman Gazdik
PRAGUE, Aug 10 (Reuters) - The new centre-right Czech
government won a confidence vote in the lower house on Tuesday,
clearing an early hurdle as expected as it seeks to push tough
budget cuts and reforms through parliament.
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 as investors assess fiscal strength
in Europe after a Greek debt crisis rattled markets this year.
Prime Minister Petr Necas's government won 118 votes in the
200-member house, the same amount of seats his three-party
coalition won in a May election with austerity pledges.
"We have a government with significant parliamentary support
... It is a really unique opportunity that may not be repeated
in a long time," Necas said on Czech television after the vote.
"We want to lead to a country that will have reformed public
finances, which will have carried out key reforms."
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.
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.
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 he added coalition cracks would remain a reality. The
group overcame a dispute last month over which ministries will
face the largest budget cuts, and analysts expect more wrangling
before October municipal and Senate elections. []
"These cracks will always appear," Just said. "(But) none of
the three parties wants 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. []
Austerity has been partly behind the crown's <EURCZK=> rise
to 21-month peaks against the euro this month, while the 9-year
state bond <CZ1002471=> yield has dropped to a lifetime low.
