Czech government seeks to cut public gap by 2014 to meet euro rules

(PRAGUE) - The Czech government wants to cut the country's public finance deficit below a limit set by euro adoption criteria by 2014, Prime Minister Jan Fischer told reporters on Thursday.

Finance Minister Eduard Janota said a deficit cut below 3.0 percent of gross domestic product, outlined in the government's euro programme due to be approved on February 8, would allow the country to adopt the single currency in 2017.

"Our deficit for 2009 and the planned gap for 2010 have significantly postponed euro adoption," said Fischer, a non-partisan premier who is leading the country until elections scheduled for May.

The Czech Republic formerly expected to join the euro much earlier but then kept putting off the target date, also because of high public deficits.

The finance ministry estimates the ratio of last year's public finance gap to GDP at 6.6-6.9 percent, a dramatic worsening against a 2.1 percent figure in 2008, caused by the global economic downturn.

The state budget approved for this year would result in a public deficit worth about 5.3 percent of GDP, but the ratio may grow because of increases in welfare spending, pushed by left-wing parties in parliament.

"The convergence programme is something that should ... put public finances back on track so we could at least contemplate joining the euro," said Fischer.

The finance ministry also said Thursday it expected the country's GDP to grow by 1.3 percent this year, up from a previously estimated 0.3-percent growth, and by 2.6 percent in 2011.

The Czech central bank, meanwhile, predicts 1.4-percent economic growth for 2010.

The finance ministry expects the economy to have contracted by 4.0 percent last year. The first official estimate of the 2009 figure is scheduled for release on February 12.