Czech centrist, centre-right parties reach agreement on government, key agenda

PRAGUE (Reuters) -Czech centrist and centre-right parties reached an agreement on forming a majority coalition government and its key agenda, the chairman of the strongest party in the new coalition said on Tuesday.

The five-party coalition faces elevated inflation, mounting debt, an economy curbed by a global shortage of semiconductors and surging energy prices, and a resurgent COVID-19 pandemic which has been gathering pace in recent weeks.

Petr Fiala, Civic Democrats (ODS) chairman and prospective prime minister, said the parties have agreed on distribution of government posts among them, although he did not name the individual candidates.

“We have gone through a long, whole day, but also successful negotiations,” Fiala said at a televised briefing after talks which lasted more than 12 hours.

“We reached an agreement on our coalition treaty, we have also agreed on our coalition agenda,” he said.

The parties, grouped in two coalitions, won 108 seats in the 200-seat lower chamber of parliament in the Oct. 8-9 election, beating the current Prime Minister Andrej Babis, whose key allies were ousted from the parliament.

One of the main tasks for the forming coalition is the state of public finances, hit by the pandemic and measures meant to tame it, as well as generous spending by the outgoing government which raised pensions and state employees wages, while it pushed through large tax cuts.

The Finance Ministry, which sees this year’s fiscal gap at 7.7% of gross domestic product, has proposed a 2022 central budget with a deficit of 377 billion crowns ($17.09 billion), deeper than the final result in 2020 when the pandemic hit.

The incoming coalition has said that it wanted to change the budget, which may result in provisional financing at the beginning of the next year, because of the limited time left to approve any substantial changes before this year’s end.

Despite their relatively fast agreement, it may yet take some time to actually form the government, as the key player, President Milos Zeman, has been hospitalised since Oct. 10, with next to no information on his condition.

Fiala said that he was informed by the president’s chief of staff that Zeman is ready to meet him once he is transferred from intensive care, but he did not give any further details.

($1 = 22.0600 Czech crowns)

(Reporting by Robert Muller; editing by Chris Reese and Richard Pullin)

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