RPT-Czech party leaders pledge new cabinet in a month

                                
 (Repeats story published late on Monday)
                                
 * Coalition agreement seen reached by July 7
                                
 * Government to start preparation of 2011 budget
                                
 By Jan Korselt
                                
 PRAGUE, June 14 (Reuters) - Czech party leaders agreed on
Monday to reach a coalition deal by early July and form a
government by mid-July to kick off preparations for the 2011
budget.
                                
 The rightist Civic Democrats, the conservative TOP09 party,
and the centrist Public Affairs have been in talks to form a
coalition since they won a strong majority in a May 28-29
election.
                                
 Pension reform and details of how to cut the quickly rising
budget deficit are expected to be the biggest challenges, along
with agreement on ministerial posts.
                                
 "We agreed ... that the newly formed government between July
10 and 15 should start working on the first numbers of the
budget for the next year," Civic Democrat leader Petr Necas told
journalist late on Monday.
                                
 Necas said a coalition agreement including proposals for
individual ministerial posts should be reached by July 7.
Parties will then have to approve it internally within days.
                                
 President Vaclav Klaus asked Necas to lead talks on forming
the government on June 4 and to receive a feedback on the talks
by June 18. The mandate given to Necas is a traditional
political act rather than an official appointment.
                                
 If parties succeed in agreeing a coalition deal, Klaus will
officially appoint Necas and ministers proposed by him. The new
cabinet will then have 30 days to ask the parliament for
confidence.
                                
 With a 118-seat majority in the 200-seat lower house, the
cabinet should win a confidence vote with a comfortable margin.
                                
 BUDGET IN SPOTLIGHT
                                
 The victory of parties promising fiscally prudent reforms
pleased investors and Fitch Ratings revised the Czech Republic's
outlook to positive from stable based on the election result.
                                
 But tough talks are expected on how the budget deficit
reduction should be done.
                                
 In the updated convergence programme sent to the European
Commission this year, the Czechs pledged to trim the public
sector gap to 5.3 percent of gross domestic product this year
from 5.9 percent in 2009.
                                
 The shortfall should drop further to 4.8 percent in 2012,
and below 3 percent in 2013, the plan said. The European
Commission criticised the scheme for lacking details.
                                
 Parties differ on how this should be done. The Civic
Democrats pledged in their election programme they would not
raise taxes and would achieve a deficit reduction by cuts. But
economists warn cuts alone are not enough and some tax hikes
must be implemented as well.
                                
 The 2010 budget is also still an open issue. It remains to
be seen how much more additional savings must be made to bring
the deficit down to the target. TOP09 deputy chairman Miroslav
Kalousek, one of the candidates to be finance minister, has said
some 12 billion crowns ($569 million) in additional savings must
be found.
 (Writing by Jana Mlcochova; Editing by James Dalgleish)