PRAGUE, Nov 27 (Reuters) - Czech political parties must support reforms by the interim government ahead of next May's general election or face a surge in its 2011 budget deficit above 6 percent of GDP, Finance Minister Eduard Janota said on Friday.
The caretaker Czech government, which took power in May this year from a minority centre-right cabinet, has been among the first in central Europe to cut the budget gap without external prodding.
However, Janota said the moves made so far would not be enough to contain the budget if parties did not support further steps early next year.
"The situation will become completely disastrous if we do nothing, if the political scene decides to pretend they don't care about the public finance in the pre-election period," Janota said at social policy conference.
"Should this be the case, then my successor will not be able to compose a budget (with a deficit) below 6 percent (GDP). We will get into trouble with the European Commission." The Czech economy shrank this year with only a mild recovery seen in 2010. A fall in tax revenue together with higher spending to tackle growing unemployment has exposed years of growing budget imbalances, previously obfuscated by fast growth.
Thanks to its stable banking system and lower deficits in recent years, the country has avoided the need for international bailouts provided to Hungary, Romania and others.
The Czech parliament has approved the first reading of the 2010 budget draft, locking in a shortfall of 162.7 billion crowns ($9.20 billion) which would lead to an overall public sector gap of 5.3 percent of GDP.
This year's gap is seen at 6.5 percent. [ID:nLN179609]
Lawmakers have passed a $4 billion package of tax hikes and spending cuts to help shave around 2 percentage points off next year's budget deficit, but the legislative changes came after long political wrangling and most expire in 2011. [ID:nL554467]
(Reporting by Robert Mueller, writing by Jason Hovet; editing by Patrick Graham) ((prague.newsroom@thomsonreuters.com; Reuters Messaging: jason.hovet.reuters.com@reuters.net; +420-224 190 476)) ($1=17.68 Czech Crown)