The lower house of the Czech parliament Wednesday voted to approve the country's budget for 2008 with a budget deficit of under 3 per cent of the gross domestic product (GDP), according to dpa. The bill was passed by a tight majority in a closely divided 200-seat lower chamber. One hundred members of parliament backed the government proposal, while 97 opposition lawmakers rejected it, CTK news agency reported. The budget outlines a deficit of 70.8 billion koruny (3.96 billion dollars) or 2.95 per cent of GDP, as the cabinet expects revenues of 1,037 billion koruny and expenditures of 1,107 billion koruny next year. The budget thus meets earlier recommendations by the European Commission that asked the country to draft a 2008 budget with a gap of under 3 per cent of GDP. The low deficit is the only condition for switching to the euro, the common currency of the European Monetary Union, which the Czech Republic has struggled to meet. The gap is expected to climb well over 3 per cent this year. Despite the booming economy, which has grown to 6 per cent in recent years, spendthrift Czech governments have been lax about keeping the budget gap tight. Sprawling deficits have already caused the government to scrap 2010 as its planned target for adopting the common European currency. But plans for a tighter budget gap next year are not to result in a speedy adoption of the euro. Czech Prime Minister Mirek Topolanek recently disappointed the country's business community by saying that switching to the euro in the next five years is unrealistic. He said the Czech Republic must first reform its healthcare and pension systems in order to be ready to scrap the ever-strong Czech koruna. "When we enter the eurozone we will lose our monetary policy," said Raiffeisenbank analyst Ales Michl. "It is best to enter with a balanced budget. If the reforms actually take place, the move is reasonable." In order to tame the deficit, the centre-right cabinet managed to push through a set of economic measures in August. But it is uncertain whether the 10-month-old government will be able to introduce any in-depth reforms as it has only a fragile majority in the parliament. Analysts say the 2008 budget still does little to fix the country's public finances. "The budgetary spending is growing faster than GDP. It is above 6 per cent," Michl said. The bill must be now approved by the president.
