Tough cost-cutting reforms lie ahead for Czech Republic

CZECHS ARE braced for painful cost-cutting reforms after Petr Necas was appointed the country’s prime minister at the head of a new centre-right coalition government.

Mr Necas campaigned for the general election in May on a pledge to overhaul the Czech health, education and welfare systems in a bid to shrink the country’s budget deficit and avert the threat of what he called a “Greek-style” debt crisis.

He was installed as premier yesterday by Czech president Vaclav Klaus, who urged the three-party coalition to make the most of its majority in parliament; with 118 of the 200 seats in the chamber, the alliance is the country’s strongest since it split peacefully from Slovakia in 1993.

“I believe your government will be stable,” he told the new cabinet at Prague Castle. “It has a great precondition for that – the biggest majority in the lower house in the modern Czech Republic’s modern history.”

The Czech Republic has not suffered as badly as some of its neighbours during the global downturn. Its export-orientated economy contracted 4.2 per cent last year, but is expected to grow by 1.6 per cent this year.

Analysts have warned that it faces a rapidly growing budget deficit in the years ahead, prompting Mr Necas and his Civic Democrat party (ODS) to call for immediate action.

The ODS and its coalition partners – two new parties called Top09 and Public Affairs – have agreed not to raise taxes but instead to cut benefits, increase payments for healthcare, encourage more private saving for pensions, and introduce university tuition fees.

The government’s first task will be to draft a budget to meet its pledge to cut the deficit to 4.6 per cent of gross domestic product in 2011, from 5.9 per cent this year. Mr Necas wants to reduce the deficit to 3 per cent by 2013.

Mr Necas (45), a physicist-turned-politician, said his government would “take the fundamental steps – to stop the growth of debt, bolster the rule of law and fight corruption.”