Czech government taps reserve to shore up budget

...million) on mandatory building savings and health insurance grants, Prime Minister Mirek Topolanek said.

The budget, which targets a deficit of 91.3 billion crowns, lacked money to cover planned expenditure after lawmakers approved dozens of amendments last year diverting funds to investment and other projects in their constituencies.

The government decision was required to release money from the reserves for annual contributions to individuals' building savings accounts and payments on health insurance for people whose policies the state covers.

It highlighted rising tensions in the public finances stemming from imprudent budget management and surging social spending. The overall fiscal deficit is expected to swell to 4 percent of gross domestic product (GDP) this year.

In past years, Czech ministries have been allowed to put aside money not spent in one year in a reserve which they have then been able to tap the following year for spending above their budgetary allocation.

But this year's emergency fiscal restriction banned departments from using the reserve funds altogether, apart from EU-sponsored projects, farm subsidies under the common EU policy and reconstruction after heavy flooding in past years.

Legislation approved before the 2006 election boosted social transfers by 36.2 billion crowns, or 1.1 percent of GDP, this year, denting public finances and forcing the country to give up on earlier aspirations to adopt the euro in 2010.

It has yet to set a new target date.