Czech lawmakers eye changes to fiscal reform bill

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PRAGUE, June 5 (Reuters) - Lawmakers will probably propose an amendment to the Czech government's fiscal reform package after the controversial bill's expected approval in an initial parliamentary vote on Wednesday, a government deputy said.

The reform package mildly cuts social and discretionary spending and rebalances taxes mainly in favour of companies and top wage earners, a structure that has angered the leftist opposition as well as some in the government camp.

"It should pass the first reading and then working groups will meet and discuss possible changes," said Petr Bratsky, deputy for the senior government Civic Democratic Party (ODS), told Reuters after the ODS's caucus meeting in parliament.

Rebellious ODS deputy Vlastimil Tlusty, a former finance minister, has indicated he would propose amendments to the bill in the second reading over the summer. He demands bigger tax cuts than the government is proposing, which economists said would threaten to derail budgetary stability.

Prime Minister Mirek Topolanek has sounded confident all coalition deputies as well as two renegade opposition deputies would rally behind his fiscal plan which aims to cut the deficit to 3.2 percent of GDP in 2008 from 4.0 percent seen this year.

The government has just 100 votes in the 200-seat lower house of parliament, so it needs full support of its own deputies as well as opposition backing or abstentions from at least one opposition deputy to push the reforms through.

Analysts cautioned the deficit-reduction plan, already criticised as being too little, too late to clean up the European Union member country's public finances, could be watered down during the upcoming parliamentary debate.

"Our bias is that the package will pass smoothly through the first reading but more uncertainty exists over the final reading due in July," said Pavel Sobisek, economist at UniCredit Markets & Investment Banking in Prague.

"Apart from the risk of the draft being rejected, the additional threat is that compromises from all sides will render it macroeconomically meaningless," he added.

Two leftist Social Democrats rebels struck a deal with Topolanek allowing his government to win a confidence vote in January but they have yet to say whether they will vote for Topolanek's deficit-reduction plan.

Topolanek has repeatedly said the government would try provoke an early election if parliament rejects the reforms.

"Unless this is approved, this government will collapse," Topolanek said in a newspaper interview published on Tuesday.

Keywords: CZECH REFORMS/