* Coalition leader Civic Dems want faster deficit reduction
* Negotiator wants 2011 3.6 pct 2011 gap vs 4.8 pct plan
* Analysts say pledge may be mainly ploy for coalition talks
* Partner sees struggle to meet even 4.8 pct target
(Adds analysts)
By Robert Mueller
PRAGUE, June 23 (Reuters) - The leading Czech right-wing
Civic Democrat party aims to cut the 2011 fiscal deficit at
least to 3.6 percent of economic output, much deeper than
previously released plans, party officials said on Wednesday.
The target, which analysts say would be highly ambitious,
comes as centre-right parties that are forming a new government
sit down with the outgoing finance minister to begin work on the
2011 budget before taking power, most probably in mid-July.
The Civic Democrats, with the conservative TOP09 party and
centrist Public Affairs, won a strong majority in May elections
promising austerity and a battle against corruption. But they
now seem to differ on their promises on budget consolidation.
Martin Kocourek, the Civic Democrat's main economic expert
and a possible for finance minister, said the party wanted to
slash 70.5 billion crowns ($3.74 billion) in spending, including
cutting the amount of money paid in state wages by a tenth and
reducing social benefits.
The aim was a fiscal gap at 3.6 percent of gross domestic
product in 2011, he told Reuters, confirming a report in daily
Lidove Noviny.
The party's leader and likely next prime minister Petr Necas
had targeted a 2011 deficit at 4.0-4.5 percent of gross domestic
product, but softened his line earlier this month and committed
to a ceiling of 4.8 percent.
Civic Democrat economic specialist Michal Doktor said
appetite for further cuts and an improving economic outlook in
the country's trade partners will help lower the budget more.
"It is a combination of a willingness to cut more and a
slightly more favourable outlook on the economic development in
the European Union, mainly on countries that we depend on (for
trade)," Doktor told Reuters.
SOFTER LINE
The Czechs and central European neighbours including Poland
generally kept public deficits and debt lower than many of their
richer western neighbours both before and after the global
financial crisis erupted in 2008.
But to meet the EU's 3 percent of GDP ceiling on the
deficit, they all must wring more savings from economies that
are still relatively poor and in need of extensive investment at
a time when growth and budget revenues have slumped.
The Czech deficit is expected to hit 5.3 percent in 2010, in
line with promises made by the outgoing government.
Analysts said the Civic Democrats' budget statements could
most likely be taken as part of the negotiations, but that the
optimistic targets of the party may signal growth will be better
than previous forecasts from the Finance Ministry.
"It is quite ambitious because it would present quite a
significant cut in terms of GDP," said Anne-Francoise Bluher, a
Komercni Banka analyst.
Analysts said more details from the budget talks would be
needed to estimate the drag austerity may create on growth.
Petr Gazdik, a negotiator for the conservative TOP09, a
partner in the emerging coalition, said there was a risk the
parties would have to find more cuts to keep the deficit next
year even under 5 percent.
"We are still making calculations on whether we will reach
the 4.8 percent limit, but I am afraid it could even be 5
percent, and we would have to seek more savings," he said.
The parties have so far agreed in principle on measures such
as cutting state salaries and lowering budgets for ministries
and other public bodies.
Outgoing Finance Minister Eduard Janota is expected to hand
over a plan to the incoming cabinet with a series of cuts and
tax hikes to trim the 2011 budget gap by 68 billion crowns.
(Writing by Jason Hovet; editing by Patrick Graham)
