The Czech government has agreed to freeze 23.6 billion crowns (807 million pounds) in this year's spending in an effort to cut the public sector deficit according to plan, Prime Minister Petr Necas said on Wednesday.
The centre-right administration has pledged to trim the total fiscal gap to 3.5 percent of GDP this year from an estimated 3.7 percent in 2011.
It is not only the matter of keeping the public finance deficit at 3.5 percent and not raising the government debt needlessly, but mainly ... this is a clear and trustworthy signal of the Czech government that it is determined to maintain its fiscal strategy of reducing the deficit despite the unfavourable development of the economy, Prime Minister Petr Necas told a news conference.
The small and open central European economy, which shrank for a second consecutive quarter in the last three months of 2011, is expected to stagnate this year.
The government put together this year's budget on an assumption of 2.5 percent growth, and now it must find additional sources of revenue or cut spending if it wants to keep the deficit on target.
As the economy slid in recession, the Necas administration is under pressure to abandon its austerity path aimed to balance budgets by 2016. On Tuesday it survived the latest attempt by the leftist opposition to overthrow it. ID:nL6E8EK5NW]
Thousands of Czechs protested in the streets of Prague and other Czech cities last week, demanding that the government step down. Trade unions announced a nation-wide demonstration against the budget cuts for April 21.
Education Minister Josef Dobes said during the Wednesday's cabinet session that he would resign from the government on Thursday as he voted against the freeze, including a 2.5 billion cut at his ministry's spending, news agency CTK reported.
The government plans to save a total of 150.4 billion crowns over the next three years, including the 23.6 billion freeze this year, to cut the public finance deficit to 1.9 percent of GDP by 2014.
(Reporting by Jan Korselt, Writing by Jana Mlcochova; Editing by Dan Grebler)