Czech deputies open debate on 2007 budget draft

PRAGUE, Oct 26 (Reuters) - The Czech parliament's lower house opened on Thursday debate on the 2007 draft budget, which looks likely to clear its first parliamentary hurdle after some opposition parties indicated they may vote for the plan.

The budget draft targets a deficit of 91.3 billion crowns ($4.05 billion), down from this year's forecast shortfall of more than 100 billion crowns.

But it falls short of any fundamental reforms economists say are needed to prepare for euro entry, which the government said late on Wednesday would not be in 2010 as previously planned.

The minority rightist government needs to win support from opposition parties to pass the annual spending plan in the first of three readings.

The cabinet of Prime Minister Mirek Topolanek remains in power as a caretaker administration after losing a confidence vote earlier this month in the lower house, where right and left parties have the same number of seats as each other.

The five-month-old parliamentary deadlock following a June election has fanned investor concerns over the fiscal outlook.

If no budget is approved by Jan. 1, public finances will have to follow a provisional budget, limiting the government's discretionary spending at the level of the previous year but allowing for an increase in previously approved social handouts.

((For FACTBOX on budget forecasts and the process and timeline of approving a budget draft, double click on [ID:nL16534799]))

((Reporting by Marek Petrus; Editing by Mike Peacock; Reuters Messaging: rm://marek.petrus.reuters.com@reuters.net; e-mail: prague.newsroom@reuters.com or marek.petrus@reuters.com; Tel: +420 224 190 477)) ($1=22.53 Czech Crown) Keywords: ECONOMY CZECH BUDGET