* Agreement on cabinet was key hurdle in coalition talks
* Kalousek favours austerity, against tax hikes
* Schwarzenberg to take over foreign ministry
(Adds background)
By Robert Mueller
PRAGUE, June 30 (Reuters) - Czech parties negotiating the
formation of a centre-right government agreed on the division of
key cabinet posts on Wednesday, including the appointment of
austerity advocate Miroslav Kalousek as finance minister.
The agreement is a big step forward in new Prime Minister
Petr Necas's drive to form a strong government capable of
slashing the budget deficit and launching pension and social
policy reforms that have been hampered in the past by weak
parliamentary majorities.
Spokesman Martin Kupka of Necas's Civic Democrats confirmed
the agreement on Kasoulek and several other posts after 8 hours
of talks with the conservative TOP09 party and the small
centrist Public Affairs.
Under the deal, the Civic Democrats will take the industry
and defence portfolios, among others, while popular TOP09 chief
Karel Schwarzenberg will become foreign minister.
Kalousek, 49, is deputy chief of TOP09 and led the finance
ministry between 2007-2009 in a centre-right cabinet which
lacked parliamentary backing for bold reforms and collapsed in
March last year.
He is known as a strong supporter of fiscal austerity and
opponent of tax hikes, but waited to react when the economy fell
into recession last year, allowing a jump in the budget deficit.
Economists have said it was appropriate to allow a bigger budget
gap to counterbalance the drop in output.
DEFICIT CUTS
The outgoing caretaker cabinet has pledged to cut the budget
deficit to 3 percent of gross domestic product (GDP) in 2013
from 5.9 percent last year.
Necas has promised to meet the same reduction target, which
foresees a cut in the deficit to 4.8 percent of GDP next year,
or do better.
The parties have already agreed to cut spending by 56
billion crowns ($2.65 billion) next year, with Kalousek's TOP09
pushing for tough reductions in spending. []
The Czech public debt load of 35.4 percent of GDP last year
is less than half the European Union average and the country has
not had any refinancing problems, but the debt has been rising
fast and analysts warn it may get out of hand over the medium
term without reforms.
Finding an agreement on Kalousek and other ministerial posts
has been the toughest obstacle in the talks between the three
parties, which won 118 seats in the 200-seat lower house of
parliament in an election last month.
The Civic Democrats have worried that Kalousek would be an
overly powerful figure at the finance ministry, which
administers state assets and runs large procurement deals.
He could also use the post to boost the profile of TOP09 as
the top reform party, an image the Civic Democrats hope to
cultivate for themselves, fearful that TOP09 could displace them
as the main right-of-centre party.
Necas, a 45-year physicist known for personal modesty and a
clean record not tarnished by graft scandals, is aiming to have
his full cabinet appointed and operational by mid-July in order
to have time to shape the 2011 budget.
(Writing by Jan Lopatka; editing by Noah Barkin)
