* Leftist parties pull plug on early election plan
* Interim PM says will quit unless parties cut budget gap
(Adds PM demands, analyst quote)
By Jan Lopatka
PRAGUE, Sept 15 (Reuters) - Czech leftist parties torpedoed
chances of a November early election on Tuesday, deepening
uncertainty over eroding state finances that the caretaker
cabinet warned could eventually cause a meltdown.
The leftist Social Democrats and the far-left Communists
rejected an earlier agreed plan to dissolve the lower house of
parliament on Tuesday and allow for an election, effectively
killing the motion before it got to a vote.
The expected delay deepens weeks of political turmoil and
transforms Jan Fischer's non-partisan cabinet, originally set up
to prepare for an early vote, into a government that must try to
coerce parties into tax hikes and savings.
The prime minister said he was ready to stay on until the
end of the regular term in June 2010 -- but only if parties
commit to tax hikes and spending cuts necessary to slash the
budget gap. Otherwise, he said he would quit. []
The about-face also deepens acrimony between the two main
parties, the right-wing Civic Democrats, whose government fell
during its European Union presidency in March, and the Social
Democrats.
Social Democrat chief Jiri Paroubek said his party had
scuppered the election plan because it could be legally
challenged, an unacceptable risk after the constitutional court
killed a previous attempt to hold early polls last week.
"This option ... is unacceptable for the Social Democrats,"
Paroubek said. "The Czech Republic now needs a stable government
more than ever and the cabinet of Jan Fischer must assume this
responsibility."
Political analysts said that while Paroubek may be right
about some legal risk to the election, there was also a
political motive -- hopes that the economic crisis and rising
unemployment could boost support for the left.
DELAY COULD HELP BUDGET
The interim government expects the 2010 budget gap to reach
7.4 percent of gross domestic product.
Fischer said he required that the parties agree to cut the
gap to 5 percent through tax hikes and spending cuts, a move
grudgingly supported by the right but not by the left.
Some analysts said that the delay could actually help the
budget because of Fischer's pressure, the fact that the budget
won't fall victim to the populist election promises, and the
fact that parliament will keep working without interruption that
would be caused by the election.
"It is definitely good news for next year's budget," said
Tomas Sedlacek, chief macroeconomic strategist at bank CSOB.
"First, because we will avoid a provisional budget...
second, it seems that the Fischer government set a relatively
restrictive budget as a condition for its existence."
The Social Democrats' about-face was the latest move sowing
deep political chaos in recent months.
The country originally called an early election for October,
but that was invalidated by the Constitutional Court last week.
Parties then agreed to dissolve parliament and hold the
election on Nov. 6-7.
The Czech crown was virtually unchanged after the decision,
and later traded firmer alongside other regional currencies.
(Additional reporting by Jana Mlcochova, Robert Mueller and
Michael Winfrey; Editing by Dominic Evans)
