* PM says will propose savings to cut 2010 budget gap
* Parties: impossible to adopt changes before Oct election
(Adds reaction of political parties)
By Jana Mlcochova
PRAGUE, Aug 31 (Reuters) - The Czech interim cabinet will
propose a fast-track savings package ahead of the October
election to cut the budget deficit despite politicians' refusal
to sign up to savings now, Prime Minister Jan Fischer said on
Monday.
The Czech Republic faces a budget gap shooting up to over 7
percent of gross domestic product this year and next as an
economic downturn laid out bare the long-term trend of eroding
state finances masked by years of fast economic growth.
The non-partisan Fischer said his cabinet would propose a
range of measures to cut the budget gap below 230 billion crowns
($12.95 billion) next year, which the government said is the
smallest possible under current legislation and economic
conditions.
The government had earlier floated ideas to hike the sales
tax and cut spending but the country's main political parties
refuse to sign up to the plan ahead of the election.
But Fischer said he had to move ahead and it was up to
politicians to make the decision.
"I feel an obligation...to come up with a proposal for which
the government will not have to feel ashamed," Fischer told a
news conference.
"If the parliament does not accept the package, it is
necessary for politicians to say so. Let the public hear that
they rejected such proposal, with them taking the
responsibility."
The country has escaped a funding collapse seen in Hungary
or the Baltics but the finance ministry has warned that
fast-rising debt could dent the country's ratings. The Czechs
have a 'A' rating from Fitch, the best among central Euroepan
countries that have not adopted the euro so far.
Fischer said the cabinet would discuss detailed measures to
be proposed on Sept. 9. He gave no details but plans floated
earlier by Finance Minister Eduard Janota called for a 70
billion crown reduction in the gap.
The proposed measures included a hike to both value added
tax rates to 11 percent from 9 percent and to 20 percent from 19
percent, which could bring some 20 billion crowns. It also
included 37 billion in cuts in various spending mandated by
current law.
Fischer added this year's overall budget gap would reach 7.4
percent of gross domestic product and remain at the same level
next year unless the corrective measures are adopted.
POLITICANS SCEPTICAL
The leading right-wing Civic Democrat party leader Mirek
Topolank rejected earlier on Monday changing key laws before the
October vote.
"The real solution is to prepare the budget according to the
valid legislation (with a 230 billion crown gap)... prepare it
for the new lower house, new government, including Janota's
proposals," Topolanek told reporters.
A new parliament, only after the election, should approve
the budget and add new legislation aimed to cut the deficit.
"Any other solution is, I would say, very impure, and
impossible to push through in the current lower house that lacks
a mandate."
The leading leftist Social Dmeocrats were also sceptical.
"I see no chance to approve (the package) by the end of
September," Social Democrats leading economic expert Jiri Havel
said.
He said it was highly unlikely parties would agree on such
key changes just ahead of the election.
(Additional reporting by Robert Mueller, Writing by Jan
Lopatka; Editing by Victoria Main)
