RPT-Czech FinMin mulls 2012 euro entry target - paper

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PRAGUE (Reuters) - The Czech Republic may set 2012 as the new euro entry target, Finance Minister Miroslav Kalousek said in a newspaper interview published on Saturday.

The central European country has dropped 2010 as the entry date after elections last year, due to deepening fiscal deficits which stop it from meeting the euro adoption criteria.

The new centre-right government has had a more cautious approach to euro entry than the previous Social Democrat administration, and has so far not given any possible entry dates.

Kalousek said in daily Lidove Noviny that he will submit a national plan on euro adoption the the cabinet in March.

"I believe -- but that is an opinion which I am ready to correct, correcting it is not an insurmountable obstacle -- that the national plan could include the euro adoption date of Jan. 1, 2012," the paper quoted Kalousek as saying.

The new centre-right government aims to slash budget deficits to 2.3 percent of gross domestic product in 2010 from about 4 percent expected this year, mainly through cutting social spending and rationalising healthcare.

The euro entry ceiling is a deficit of 3 percent of GDP.

The government has also promised to cut taxes, a plan including the adoption of one single personal income tax rate of 17-19 percent, from up to 32 percent at present.

The government, however, has just 100 seats in the 200-seat lower house of parliament, and many of its planned reforms may face tough resistance in the chamber.

Kalousek is a member of the centrist Christian Democrats, one of two junior partners in the coalition led by the right-wing Civic Democrats of Prime Minister Mirek Topolanek.

The coalition has said it would try to provoke an early election if its reforms fail to win approval in parliament.

The Czechs have low inflation and short-term interest rates below the euro zone, despite fast economic growth.

But they need to cut the budget gap and enter the pre-euro ERM-2 currrency band for at least two years prior euro entry.

The Czech crown has been floating freely and the Czechs want to join the ERM-2, a +/- 15 percent band around a central parity exchange rate, for only as short term as possible in order to avoid having to target exchange rate levels as well as inflation.