PRAGUE, May 8 (Reuters) - Czech President Vaclav Klaus
appointed an interim government on Friday which will lead the
country to an early election, ending a political crisis that
crippled the country's EU presidency and policymaking amid a
sharp economic downturn.
The cabinet, led by non-partisan Jan Fischer as prime
minister, replaces a centre-right administration of Mirek
Topolanek, overthrown in a no-confidence vote in late March.
Below are key issues for Fischer's team to handle.
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* 2010 STATE BUDGET
Finance Minister Eduard Janota is charged with drawing up a
2010 state budget amid an economic crisis that hikes welfare
spending and curbs tax and social insurance revenues, key income
for the state coffers.
Janota said he aimed to put together a central state budget
with a deficit lower than this year's expected 150 billion
crowns ($7.55 billion).
He said he would make 10 percent across the board cuts in
government expenditures to avoid a public finance collapse.
This year's total public sector gap could reach 4.5 percent
of gross domestic product (GDP) but in the absence of saving
measures the gap could hit 6.7 percent next year of total
output, Janota had warned.
Analysts say Janota's job to keep the budget gap under
control could be tough in the run-up to October elections as
parties make large spending promises.
The Finance Ministry expects the economy to shrink by 2.3
percent this year.
* EU PRESIDENCY
The Czech Republic holds the six-month EU presidency until
June, with the bloc struggling to address the economic crisis.
The Czechs' presidency role has been tarnished by the government
collapse, and some EU nations have since given a cold shoulder
to Czech initiatives.
The Czechs held a string of summits in Prague this week,
including one with heads of state from the EU and six former
Soviet countries, which was however not attended by some key EU
figures such as French President Nicolas Sarkozy.
* PRIVATISATIONS
Fischer's administration is expected to continue
privatisation of Czech Airlines (CSA) estimated to be worth up
to 5 billion crowns. The process is now in a second phase after
KLM-Air France <AIRF.PA> and a consortium comprising Czech
companies Unimex and Travel Service <ICEAIR.IC> were picked to
advance in the tender.
The ongoing sale of the Prague Airport worth up to 100
billion crowns should be completed by a government coming from
the October election.
Fischer said he was not keen on making any big government
deals and his cabinet had no political ambitions.
* CRISIS MEASURES
The outgoing cabinet led by Topolanek and his centre-right
Civic Democrats proposed and partially implemented anti-crisis
measures worth 73 billion crowns, aimed at freeing up cash flow
and credit for businesses.
The plan is focused on companies' rather than people's
income, based on an assumption that the Czech small and open
economy is highly dependent on exports and stimulating domestic
demand would have a negligible effect.
Many of the proposed measures, including a cut in social
security payments are yet to be approved by parliament, and some
are up to the new cabinet.
The leftist opposition proposes a 45-billion-crown ($2.22
billion) stimulus package including more demand-side measures
such as a scrap subsidy for old cars and higher welfare
spending.
The two main parties in parliament have agreed to support
each other's plans, but some of them -- such as the scrap
penalty -- face opposition in the cabinet.
* EARLY ELECTION
Fischer's technocrat cabinet will prepare an early election
in October. Opinion polls showed in March the leftist Social
Democrats extended their lead over the ruling Civic Democrats
after toppling the cabinet in the no-confidence vote.
The Civic Democrats ruled in coalition with the centrist
Christian Democrats (KDU-CSL) and the Green Party since January
2007.
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(Compiled by Jana Mlcochova)
