UPDATE 2-EU ministers press Czechs to cut budget gap faster

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European Union finance ministers urged the Czech Republic on Tuesday to speed up its budget deficit cuts, refusing to extend beyond 2008 a deadline to bring the shortfall below the bloc's ceiling.

"The Council considered there to be no reason to extend the deadline further," ministers said in a statement.

"It recommended that the Czech government bring the deficit below the 3 percent of GDP by 2008 at the latest."

After joining the EU in 2004, Prague agreed to reduce its deficit to beneath the cap. It told the executive European Commission early this year it may miss the target as the deficit was likely to be 3.5 percent of GDP in 2008 and 3.2 percent in 2009.

However, the government has recently approved a 2008 budget that generally complies with Brussels' demands, envisaging a deficit of 2.95 percent in 2008. The government also pledged to slash the gap to 2.6 percent in 2009 and 2.3 percent in 2010.

The ministers, who base their recommendations on legislation already implemented, told Prague to cut its structural deficit -- a gap that excludes one-off and cyclical factors -- by 0.75 percent of GDP product between 2007 and 2008.

The ministers' decision marked another step in the EU's excessive deficit procedure against the Czech Republic.

Since the country is not yet a member of the euro zone, the EU cannot go to the final step of this procedure, a fine. But the EU can freeze part of regional aid for member states which breach the deficit ceiling persistently.

A deficit below 3 percent of GDP is also a key criterion for joining the euro zone, but the Czech government says it is in no rush to adopt the currency.

Keywords: EU CZECH/BUDGET

[LUXEMBOURG/Reuters/Finance.cz]