UPDATE 1-Czech opposition sets budget support terms-report

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PRAGUE, Sept 25 (Reuters) - The Czech leftist opposition Social Democrats have set out the conditions under which they could support the right-wing minority government's 2007 budget, news Web site www.novinky.cz said on Monday.

Votes from the Social Democrats for the budget, with its planned 119 billion crown ($5.36 billion) gap, are key, because the new right-wing government lacks a parliamentary majority.

The Web site reported that Social Democrat chief Jiri Paroubek and former Finance Minister Bohuslav Sobotka said they would demand the government does not sell a 16 percent stake in power firm CEZ <CEZPsp.PR>.

At the same time, the government should approve the sale of a stake in Prague Airport to win his party's votes, Paroubek added.

The government is debating on Monday the 2007 budget draft and the sale of the CEZ stake, which would reduce state ownership in the power firm to around 51 percent.

"We repeated our negative stance toward the sale of state shares in CEZ," the Web site quoted Sobotka as saying.

Finance Minister Vlastimil Tlusty has said the government would cut the deficit by 31 billion crowns if the sale of the CEZ shares goes through, using just part of the expected sale revenue to plug the gap.

Without the privatisation revenues, the planned budget deficit is the biggest-ever in the central European country, mainly due to social spending approved ahead of an election in June.

The Finance Ministry expects the overall public sector shortfall at 4 percent of gross domestic product next year, far above the 3.3 percent target set in the country's euro convergence programme.

That figure is not dependent on the potential privatisations because such one-off revenues cannot be included under the EU's ESA 95 accounting rules used for the public sector deficit calculation.

The widening, despite record strong economic growth seen at 6 percent this year, has led the new cabinet to effectively ditch the previous Social Democrat administration's 2010 euro adoption target.

It is unclear who will be implementing the 2007 budget and potential asset sales, because the government seems set to lose a confidence vote due by Oct. 4.

It would then remain in power as a caretaker until a new cabinet is formed, which may take weeks or longer. Analysts expect the political stalemate to lead to an early election next year. ((Reporting by Jan Lopatka, editing by Gerrard Raven; prague.newsroom@reuters.com; Reuters Messaging: jan.lopatka.reuters.com@reuters.net; +420-224 190 474))

($1=22.22 Czech Crown)

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Keywords: ECONOMY CZECH BUDGET OPPOSITION