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06 January 2014

WSJ: Czech leaders agree on new centre-left government


The new three-party government, dominated by the left-leaning Social Democrats and the centrist Action of Dissatisfied Citizens movement (ANO), is expected to be appointed by the end of the month, with SD chairman Bohuslav Sobotka as PM and ANO's Andrej Babis as finance minister.

The new cabinet, with members of the small centrist Christian Democrats, is set to assess potential wasteful public spending as a way of avoiding an increase in corporate taxes as of next year to pay for higher spending, the leaders of the three parties said. This may prove a steep climb and a possible point of contention because of different policy agendas of the three coalition parties.

ANO, the startup party backed by Andrej Babis, a local business tycoon, has campaigned hard against raising taxes and making public services leaner. Mr Babis, slated to become the finance minister, wants to make government agencies spend less on their operations through unified procurement. "One can get a bulk discount by making all ministries buy, let say chairs, together rather than separately as they do so now," he said.

The Social Democrats, a traditional political party that previously served in several governments, has campaigned to raise the corporate-profit tax rate, currently at 19 per cent, and to introduce special sector-focused tax levies on banks and utilities. "We'll see in a few months whether (government ministers from) ANO can identify sufficient savings", said Bohuslav Sobotka, chairman of the Social Democrats, who is slated to become the next prime minister.

The new coalition government, controlling 111 votes in the 200-seat lower house of parliament, has pledged to help the local economy emerge from its long recession, which began late 2011. It has also promised to keep the government's budget deficit below 3 per cent of gross domestic product, estimated to total about $193 billion last year.

The three Czech parties forming the new government have so far agreed on raising income taxes on top wage earners, setting progressive taxation of incomes above 1.2 million koruna ($59,340) a year. The coalition leaders have also promised to seek new rules for public servants, including the introduction of tenured offices, which they view key for eliminating corruption in public tenders.

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