Czech govt eyes $1.1 bln spending cut in '08-paper

...spending on welfare benefits and sickness insurance, a newspaper reported on Tuesday.

The business daily Hospodarske Noviny quoted a government proposal as calling for the revoking of part of a boost to social transfers approved by parliament before elections in June 2006.

The cut is part of a package of austerity measures which the right-of-centre government of Prime Minister Mirek Topolanek wants to present officially in early April and which is aimed at reversing a widening of the fiscal deficit.

It also plans to boost state coffers with a rise in sales tax, which will be only partly offset by a cut in income taxes.

The post-election surge in social transfers is forecast to make the fiscal gap swell to 4 percent of gross domestic product (GDP) this year, versus the original 3.3 percent target.

Topolanek's government, which barely won a confidence vote in January, has said it aims to bring the deficit back towards 3 percent in 2008, but it will have a hard time pushing its plans through a hung parliament where it lacks a majority.

Hospodarske Noviny said the plan was to cut expenditure on maternity benefit by 7.6 billion crowns and on sickness insurance by about 6.5 billion, shave nearly 2 billion off child benefits, and save additional money on parental contributions.

Legislation approved before the 2006 election boosted social transfers by 36.2 billion crowns, or 1.1 percent of GDP, this year and by 49.3 billion or 1.3 percent of GDP in 2008.