Coalition parties reach final agreement on reforms

Negotiations on fiscal reforms by the government involving the leaders of the three coalition parties lasted well into Tuesday night but at the end of them Prime Minister Mirek Topolanek was able to announce a deal had been reached. The centre-right government, proposing to rebalance taxes and cut social benefits to counter the fiscal deficit, agreed on a final package just hours before the lower house continued debate.

Mirek Topolanek, photo: CTK

Prime Minister Mirek Topolanek sounded confidant on Tuesday and for good reason: his fragile coalition government had - despite a number of sticking points - managed to hammer out a final agreement on its reform programme. Here, in the hours of late Tuesday, is what the prime minister had to say:

"I think that the agreement is a proper one and that there is nothing that should prevent coalition MPs from voting for it."

The proposal saw fine-tuning by the coalition on income tax: if passed, the proposal will introduce a flat 15 percent tax rate for individuals (calculated in accordance with the super gross wage), demolishing existing tax brackets. The number would drop even lower in 2009, to 12.5 percent. Corporate taxes would also fall to 19 percent the same year. Through an expected increase in revenues and cuts in the social sector, the government is aiming to slash the ballooning fiscal deficit, which, for example, has pushed back adoption of the European currency to at least 2012.

Martin Bursik and Jiri Paroubek, photo: CTK

But the reform package is continuing to see strong opposition by the Social Democrats, the Communists, as well as the country's labour unions. The opposition Social Democrats have argued the reforms will benefit only high income earners and hurt the majority of Czechs. The party's leader, Jiri Paroubek, has criticised the package repeatedly and called the final-hour negotiations "amateurism combined with improvisation".

Ludvik Hovorka, photo: CTK

From the very beginning, the government - which has a mere 100 MPs in an evenly-split lower house - has staked its future on the reforms: as it stands, it seems now the gamble will pay off. Two former Social Democrats, who helped the government survive a confidence vote in January, said on Wednesday they had agreed to support its reform package. They made a statement after meeting with Prime Minister Mirek Topolanek.

Even so, some reservations remain: Christian Democrat MP Ludvik Hovorka, for example, has repeatedly said he will vote against, apparently the only coalition MP to do so. Mr Hovorka opposes the fact that children under the age of fifteen will not be exempt from new cash fees at the doctor's. Still, according to the numbers, the government should win enough votes to see its proposal passed. There's no need to remind any of the leaders in the coalition it's a vote the government needs to win in order to survive. A final reading on the reforms is expected next week.