Czech PM flexible on reform,promises further steps

...reform steps to appease rebels in his own party, and promised further measures deepening changes in taxes and spending.

The centre-right government has proposed to slash social and health spending and revamp tax rates in order to cut the fiscal deficit to 3 percent of gross domestic product next year and 2.3 percent in 2010, from around 4 percent this year.

But the proposals have raised protests from some members in Topolanek's Civic Democratic Party (ODS), mainly former Finance Minister Vlastimil Tlusty, who said the cabinet did not go far enough in cutting taxes and threatened to vote against them.

The government needs every single vote in the lower house of parliament and to win over some opposition deputies to keep the reform on track. It controls just 100 votes in the 200 seat lower house.

Topolanek said on Monday he had met Tlusty on Sunday and indicated he was ready to accept some of his demands.

"The meeting was useful from my point of view in the sense that we clarified... some of his views," Topolanek told a new conference marking 100 days since his cabinet won a confidence vote in parliament.

The government had presented the package as a compact measure that should be approved as it stands, but Topolanek said on Monday this was a wrong perception.

"(The package) is of course variable in the sense that the final number (of deficit) must be the same, we can move within the package," he said.

Tlusty is due to present his amendments on Thursday.

Topolanek said that the government considered the fiscal overhaul -- which mainly cuts taxes for the rich whle raising the sales tax on food, medicine and other low-taxed items -- an emergency plan that would be followed by more reform.

"I hope there will be several more reform packages coming, this really is just a stabilisation measure," he said, adding the cabinet was "pulling an emergency brake" after hikes in spending approved by parliament ahead of elections in mid-2006.

The government wants to push its initial tax and spending measures through parliament over the summer in order to be able to base the 2008 budget on new legislation.

The government has repeatedly said it would try force early election if the reforms are not adopted.