Czech parties inch towards forming new government

By Jan Korselt

PRAGUE, Dec 1 (Reuters) - Czech parties inched forward on Friday in talks on forming a new government, setting a schedule for policy discussions that may end six months of a political deadlock.

Political life has been at a standstill since an election in June produced a tied result of 100 seats each in the lower house for the leftists on one side and centrist and right-wing parties on the other.

A minority cabinet of right-wing Civic Democrats has already lost a confidence vote and the party has been trying to agree on coalition terms with the leftist Social Democrats and centrist Greens and Christian Democrats.

Negotiators from the four parties agreed on Friday to hold talks on the future government's policy programme, which should include reform of public finances, pensions, health and social security.

An outlook for large-scale budget deficits has already forced the country to abandon its 2010 target for adopting the euro currency.

"At this point we are searching, probing if it is at all possible to reach an agreement on deep reforms in the Czech Republic," Civic Democrat Vice-Chairman Pavel Bem told reporters.

"If we find out that it is possible to find an agreement, then only we will talk about the government's shape, length of mandate and some coalition agreement," he added.

The Civic Democrats, riding high in opinion polls, had been pushing for a quick early election but have slightly softened their stance, saying a government may serve longer if it undertakes fundamental economic reforms.

The Social Democrats, who narrowly trailed the Civic Democrats in the June election, want a government that would serve at least until 2009 or a full term until 2010.

Party officials said the Civic Democrats would prepare a draft programme by next Wednesday, and a final version should be ready by December 11.

Political analyst Petr Just said it seemed the talks could lead to an agreement on a cabinet which could serve until 2008 or rather until after the country's EU presidency in the first half of 2009.

"It seems on the way toward (an agreement), but the programme will be general and very cautious in the reforms in order not to force either of the big parties to big concessions," he said.

The Civic Democrats planned to introduce a single 15 percent flat tax, bring more private savings into pensions and liberalise the labour market, plans fiercely opposed by the Social Democrats.

((Writing by Jan Lopatka, editing by Andrew Dobbie; prague.newsroom@reuters.com; Reuters Messaging: jan.lopatka.reuters.com@reuters.net; +420-224 190 474))

Keywords: CZECH POLITICS/