Czech government threatened as PM's party stays split on tax
By Robert Muller
PRAGUE | Tue Oct 30, 2012 9:02am EDT
(Reuters) - The ruling Czech Civic Democrats will try to delay a confidence vote tied to an unpopular law to raise taxes, after failing on Tuesday to quell a rebellion by six of its lawmakers that threatens to bring down the cabinet.
The government has insisted it use tax hikes and spending cuts to bring its budget deficit below 3 percent of gross domestic product next year, a stance that has brought the cost of borrowing to all-time lows but also extended the longest recession in the European Union's emerging east.
"We failed to find an agreement at the morning meeting of our working group, and at this point the most rational way is to propose an interruption of the parliamentary session until next Tuesday," the chief of the Civic Democrats' parliamentary faction Zbynek Stanjura said.
"We will vote next week no matter what, even with the risk that the government will not survive."
The dissenters said they would support the delay to leave room for more talks.
If approved in a procedural ballot, postponement would push back the final vote on the tax legislation until after a Civic Democrat party congress this weekend, putting the issue at the heart of a power struggle within the ruling party.
LEADERSHIP STRUGGLE
Prime Minister Petr Necas, weakened by unpopular austerity measures, defections from his coalition and a drubbing in regional elections earlier this month, will defend his party chairmanship as well as the cabinet's policies at the congress.
Some rebels have urged a change at the party's helm but no one has come out to run against Necas, who is seen as untainted by graft scandals that have eroded voters' support for the party.
The dissenting deputies, supported by President Vaclav Klaus, argue that the 22 billion crowns ($1.14 billion) sought by Necas, mainly in value-added and income tax hikes, go against the party's program and would further depress the economy which has been in recession since late 2011.
The rebels so far have insisted on the removal of tax hikes worth more than 15 billion crowns ($774.02 million).
Necas needs the rebels' votes because the coalition now has only 100 seats in the 200-seat lower house.
He and his coalition partner TOP09 stress the fall of his cabinet should lead to an early election. Czech law however allows for a new cabinet to be formed without an election when a prime minister falls.
The center-left opposition Social Democrats, who lead opinion polls by a big margin, have been calling for an early election. The party plans to raise the country's tax level much more than the current government, mainly by higher taxes for companies.
(Writing by Jan Lopatka; editing by Jason Hovet and Andrew Roche)
