* PM says will propose savings to cut 2010 budget gap
* Parties: impossible to adopt changes before Oct election
(Adds reaction of political parties)
By Jana Mlcochova
PRAGUE, Aug 31 (Reuters) - The Czech interim cabinet will propose a fast-track savings package ahead of the October election to cut the budget deficit despite politicians' refusal to sign up to savings now, Prime Minister Jan Fischer said on Monday.
The Czech Republic faces a budget gap shooting up to over 7 percent of gross domestic product this year and next as an economic downturn laid out bare the long-term trend of eroding state finances masked by years of fast economic growth.
The non-partisan Fischer said his cabinet would propose a range of measures to cut the budget gap below 230 billion crowns ($12.95 billion) next year, which the government said is the smallest possible under current legislation and economic conditions.
The government had earlier floated ideas to hike the sales tax and cut spending but the country's main political parties refuse to sign up to the plan ahead of the election.
But Fischer said he had to move ahead and it was up to politicians to make the decision.
"I feel an obligation...to come up with a proposal for which the government will not have to feel ashamed," Fischer told a news conference.
"If the parliament does not accept the package, it is necessary for politicians to say so. Let the public hear that they rejected such proposal, with them taking the responsibility."
The country has escaped a funding collapse seen in Hungary or the Baltics but the finance ministry has warned that fast-rising debt could dent the country's ratings. The Czechs have a 'A' rating from Fitch, the best among central Euroepan countries that have not adopted the euro so far.
Fischer said the cabinet would discuss detailed measures to be proposed on Sept. 9. He gave no details but plans floated earlier by Finance Minister Eduard Janota called for a 70 billion crown reduction in the gap.
The proposed measures included a hike to both value added tax rates to 11 percent from 9 percent and to 20 percent from 19 percent, which could bring some 20 billion crowns. It also included 37 billion in cuts in various spending mandated by current law.
Fischer added this year's overall budget gap would reach 7.4 percent of gross domestic product and remain at the same level next year unless the corrective measures are adopted.
POLITICANS SCEPTICAL
The leading right-wing Civic Democrat party leader Mirek Topolank rejected earlier on Monday changing key laws before the October vote.
"The real solution is to prepare the budget according to the valid legislation (with a 230 billion crown gap)... prepare it for the new lower house, new government, including Janota's proposals," Topolanek told reporters.
A new parliament, only after the election, should approve the budget and add new legislation aimed to cut the deficit.
"Any other solution is, I would say, very impure, and impossible to push through in the current lower house that lacks a mandate."
The leading leftist Social Dmeocrats were also sceptical.
"I see no chance to approve (the package) by the end of September," Social Democrats leading economic expert Jiri Havel said.
He said it was highly unlikely parties would agree on such key changes just ahead of the election. (Additional reporting by Robert Mueller, Writing by Jan Lopatka; Editing by Victoria Main)