New Czech FinMin vows to seek spending cuts -paper

...putting the country back on track to adopt the euro.

In an interview with the weekly magazine Ekonom, Kalousek said he aimed to slash next year's spending by between 30 and 35 billion crowns ($1.39-1.62 billion), or about 1 percent of gross domestic product (GDP), to curb a widening fiscal deficit.

"The fundamental priority is to reverse the current trend in public finances," Kalousek said in his first interview laying out specific fiscal plans since taking office last week as part of a centre-right coalition government.

"And the tool to turn the trend around is preferentially on the expenditure side ... The government will have to seek agreement on these proposals in the lower house," added Kalousek, who headed the parliament's powerful budget committee between 2002 and 2005.

The coalition has half the seats in the lower house of parliament, one short of the majority needed to win a confidence vote scheduled for Friday and push through any legislation.

However, two renegade leftist deputies have agreed to abstain from Friday's vote to ensure Prime Minister Mirek Topolanek's cabinet wins the simple majority needed to end months of political paralysis. The two MPs have refused to guarantee their support in any future votes.

Kalousek suggested he would seek broader support in the lower house to push reforms after fiscal slippage last year.

He said while the coalition promised to cut income taxes, it also aimed to cut the share of expenditure mandated by law to less than 50 percent within four years, from 54.7 percent now. "However convinced I am about the importance of a reform in tax rates, the key for reversing the trend in mandatory spending and cutting the deficit is on the expenditure side," he said.

The government, made up of Topolanek's Civic Democrats, the Christian Democrats and the Green Party, seeks to cap the budget deficit at the EU's ceiling of 3.0 percent of GDP in 2008, from this year's estimated 4 percent.

It plans to cut further to 2.6 percent in 2009 and 2.3 percent in 2010.

[PRAGUE/Reuters/Finance.cz]