LONDON, Sept 2 (Reuters) - Ratings agency Moody's said on Weddnesday a hiatus over the Czech Republic's election could be negative for the country and must not block necessary reforms but would not immediately hit its sovereign rating.
Moody's analyst Dietmar Hornung told Reuters that like the wider market the agency had been taken by surprise when the Constitutional Court on Tuesday threw into doubt polls planned for October 9-10. Moody's rates the Czech Republic as A1 with a stable outlook.
"It is not good news for the Czech Republic," he said. "It is a situation we are monitoring closely... The fiscal deficit has widened this year and they do need to make budget cuts. If this stops that from happening, that would be a problem.
He said he would expect the potential delay to be resolved as quickly as possible. Czech political leaders resolved on Wednesday to move towards elections as quickly as possible, keen to get in a new government with a stronger mandate [ID:nL2581064]
"The important thing is to get a new government into place that can make the necessary reforms," said Hornung.
Finance minister Eduard Janota warned last week the country's sovereign credit ratings -- the best in emerging Europe -- might come under threat if it was unable to close its current 230 billion crown ($12.8 billion) deficit [ID:nLS523431]
Moody's Hornung said the Czech Republic remained one of the most resilient economies in the neighbourhood to the global financial crisis, helping protect their credit rating.
"Together with Slovakia, the Czech Republic provides a stable core of the region," he said. They are in a better position than other economies such as Hungary and given their economic strength they do have an element of leeway."
(reporting by Peter Apps; Editing by Ron Askew)