UPDATE 1-Czech govt aims to narrow public finance gap

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KOLODEJE, Czech Republic, March 7 (Reuters) - The Czech government is determined to reverse the widening budget deficit trend with an eye on setting a new euro adoption target, Finance Minister Miroslav Kalousek said on Wednesday.

Kalousek said after a regular cabinet meeting that he will have a package of spending and tax reforms ready to tackle the deficit by the end of this month or in early April, seeking to narrow the fiscal gap to 3 percent of GDP in 2008.

The deficit is forecast at 4 percent of GDP this year, but government officials have warned it could bloat to 150 billion crowns ($7 billion) next year -- or 4.4 percent of GDP -- unless the government reins in fast spending growth.

The Czechs were forced to scrap their original 2010 euro adoption plan late last year due to the poor state of public finances, and have yet to set a new target, though the government is set to discuss the topic on March 12.

"I would personally like to have a euro adoption target date set, but if I am in the minority (within cabinet), it won't be set (in the EMU strategy plan)," Kalousek said.

He said the government plans to propose cuts to personal and corporate taxes, and changes to the value-added tax rate, but gave no specifics.

The central state budget accounts for most of the public finance total, which also includes municipal budgets, healthcare insurance companies and various off-budget funds.

Private sector economists and central bank policymakers alike say a wide public finance deficit is the key impediment to both sustainable growth and timely adoption of the euro currency.

But deficit-cutting plans will face stiff opposition in parliament, where the government controls just 100 out of 200 seats.