Czechs to update euro roadmap once new govt formed

PRAGUE, Nov 29 (Reuters) - The Czech Republic will delay the annual update of its euro convergence plan until after any new government has taken power and set a strategy for cutting a yawning fiscal deficit, the Finance Ministry said on Wednesday. A minority cabinet of right-wing Civic Democrats, ruling in a caretaker capacity and preparing the plan to send it to Brussels next month, lacks the mandate to decide on medium-term fiscal reforms, the ministry said.

"Therefore, the update of this programme will be finished (only) after the political situation has been resolved," said a statement posted on the ministry's official Web site.

A ministry official said the proposed plan, to be discussed at a cabinet meeting on Thursday, foresees a cut in the public deficit to 3.5 percent of gross domestic product (GDP) in 2008 and 3.0 percent in 2009, from a forecast 4 percent gap in 2007.

This merely re-iterates the outlook envisaged by a euro convergence analysis approved by the outgoing Civic Democrat government in October when it dropped the aim of joining the euro zone in 2010 and opted out of setting a new target date.

European Union member countries not participating in the single currency area submit their convergence programmes every year to Brussels in December to map out the road their economies and public finances will take to secure adoption of the euro.

An inconclusive June election handed 100 seats to leftists and 100 to centrist and right-wing parties in the lower house and leaders have been unable to agree to any government set-up since the proposed Civic Democrat cabinet failed in October.

"It will be important whether (a new) government confirms or quickens the trajectory of fiscal consolidation and the fiscal targets for 2008 and 2009, and if need be, proposes further steps needed to achieve the targets," the ministry added.

The ministry official said it was likely that the European Commission would delay issuing a final ruling on the Czech convergence programme until after a new government had agreed to either confirm or update it.

((For FACTBOX on medium-term economic forecasts by the Czech government released in October, click on [ID:nL26400593]))

((Reporting by Marek Petrus; Editing by Gerrard Raven; 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))

Keywords: CZECH CONVERGENCE/