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UPDATE 1-Czech parties agree economic stimulus package

Published 04/08/2009, 12:03 PM
Updated 04/08/2009, 12:08 PM

* Govt, opposition agree economic measures

* Package seen worth about 40 billion crowns by 2010

PRAGUE, April 8 (Reuters) - The Czech Republic's main political parties have agreed a 40 billion Czech crown ($1.99 billion) package of economic stimulus to go with a deal that forms a caretaker government until elections this year.

Parties from the outgoing Czech centre-right coalition have agreed with the leftist opposition Social Democrats to support proposals on the measures to fight the economic crisis, a Social Democrat official said on Wednesday.

Party Vice-Chairman Milan Urban said the parties agreed to push through parliament measures worth about 40 billion crowns until the end of 2010, when most of the package will expire.

"There is a basic agreement on all the seven points," Urban told Reuters.

The parties agreed to support government proposals to cut the social insurance tax, speed-up asset write-offs, and change bankruptcy legislation, Urban said.

The parliament will also support opposition proposals to introduce a 30,000 crown ($1,496) scrap subsidy to those who hand in old cars and buy new ones, raise unemployment and child benefits and raise personal income tax deductions.

The main government party, the right-wing Civic Democrats, and the opposition Social Democrats have agreed to form a caretaker cabinet, to be led by non-partisan Jan Fischer, until an early election in October. The deal on the economic measures accompanies the agreement on the cabinet.

The government's proposed measures are part of earlier proposed and partially approved package worth 73 billion crowns, or about 1.9 percent of gross domestic product.

The government expects the budget deficit this year to jump to around 4 percent of gross domestic product form 1.5 percent last year, as the economy shrinks by up to 2 percent.

The Czech economy has not suffered from a banking or currency crisis, thanks to low foreign debt, but a collapse in west European demand has cut exports and manufacturing output by over a fifth early this year. (Reporting by Jan Korselt, writing by Jan Lopatka, editing by Patrick Graham)

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