Czech PM uncertain he can survive tax vote as deadline nears

Reuters News
Posted: Oct 17, 2012 11:38 AM
Czech PM uncertain he can survive tax vote as deadline nears

By Jan Lopatka and Robert Muller

PRAGUE (Reuters) - Czech Prime Minister Petr Necas said on Wednesday he was not sure he would be able to put down a rebellion by several backbenchers that is threatening to bring down the center-right cabinet as early as next week.

The central European government lacks a safe parliamentary majority and without a deal with a group of deputies in his Civic Democrats (ODS), Necas will lose a confidence vote tied to tax laws due to be debated in parliament from next Tuesday.

The government has proposed to hike the country's two sales tax rates by 1 percentage point each and to raise taxes for top earners to squeeze the budget gap to 2.9 percent of gross domestic product next year from 3.2 percent this year.

Necas said there could be no deal if the dissenters aimed to oust him, which some observers see as the real motive, rather than their stated aim of avoiding tax hikes at a time the economy suffers from a recession.

"If the heart of the matter is factual content of policy, then certainly it is moving towards some kind of an agreement," Necas told reporters. "If something else is at the core of this, for example replacement of the ODS chairman or the prime minister, then clearly there can be no agreement."

The tax plan was criticized by ODS founder, President Vaclav Klaus, in what became a rallying cry for a group of seven deputies to challenge Necas, although they had backed the tax hikes in several previous votes.

Klaus also undermined Necas ahead of a party congress on Nov 2-4 by vetoing a bill needed to start pension reforms next year.

Necas needs every single vote to win, given that his coalition's strength has shrunk through defections and a split within a junior coalition party to 100 seats in the 200-seat lower house from 118 it won in the 2010 election.

The rebels have been gaining strength, with some regional ODS officials joining the criticism of tax hikes after the party widely lost regional polls last weekend, following years of austerity and exposure of past graft dealings.

Necas offered a concession this week, which would raise only one of the tax rates. But the rebels said that was not enough.

"The message given by the election, as well as the message from all the key economists...give us a recommendation not to change any of the rates," said Marek Snajdr, one of the dissenters.

Under Czech law, an early election would be held if three-fifths of the lower house agreed to dissolve the chamber. Otherwise, a cabinet resignation would give power to Klaus to oversee talks on setting up a new administration.

The center-left opposition Social Democrats, who hold a double-digit lead in opinion polls, want snap elections. Necas has also argued for this option if he falls, hoping fear of almost certain loss would bring the dissenters into line.

(Editing by Myra MacDonald)