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Eurozone needs 'federal fiscal union' to survive: Czech PM

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(PRAGUE) - Czech Prime Minister Petr Necas, who recently nixed his country's membership in the EU's new budgetary discipline pact, on Thursday said the eurozone needed a federal fiscal union in order to survive.

"The eurozone has no choice now: either it will melt down -- something which nobody wants -- or it will move towards a federal fiscal body," Necas told the Lidove Noviny daily Thursday.

Necas called the new pact on budgetary discipline, which all EU states save the Czech Republic and Great Britain intend to join, a "fundamental step in this direction."

"States are renouncing their right to a free vote in the EU on important topics concerning the budget, and they are giving up a part of their sovereignty," he said.

Necas added that EU prime ministers were pressured for quick agreement on the new so-called "fiscal compact" at the Brussels summit on Monday, where he chose to keep the Czech Republic out of the pact.

Leaders received the final draft of the pact "with important, hastily negotiated modifications and were forced to decide immediately, without any time to reflect, without being able to consult experts or their governments," he charged.

"I'm not an 18th-century absolute monarch to be able to decide for my country just a couple minutes after having seen the modified text," he said.

Necas insisted that had Prague joined the deal, it would have "agreed to eurozone moving toward a future fiscal federation," as well as shown its "willingness to participate in this project no matter the price."

The Czech leader has however admitted the possibility of his country joining the pact in the future and possibly putting the issue to a public referendum.

However, Czech President Vaclav Klaus, an ardent eurosceptic, has vowed to veto any Czech moves to adhere to the pact, designed to prevent future debt crises.

Pushed by Germany and the European Central Bank, the treaty -- to be formally signed in March -- will require governments to introduce laws on balanced budgets and impose near automatic sanctions on countries that violate deficit rules.

Only those countries that sign up will be able to access bailout aid from a new rescue fund.

In the wake of the debt crisis, threatening to torpedo the 17-member eurozone, Necas's centre-right government said it will not adopt the euro during its term ending in 2014.

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