Central bank: political stalemate leaves financial policy adrift

The central bank has warned that the Czech Republic faces growing uncertainty over its public finances amid a two-month deadlock over who will form its next government. Bank members highlighted "major uncertainty" over fiscal policy, in particular over public spending, in the minutes of a recent board meeting. The board said it was impossible to determine the direction of fiscal policy in the current circumstances. Elections on June 2-3 for the lower house of parliament resulted in an even split between centre-right and left-wing blocs, with each getting 100 votes in the 200-seat assembly.

The outgoing Social Democrat government, meanwhile, has proposed a budget that shows a deficit of 88 billion crowns (the equivalent of almost 4 billion US dollars) for 2007. The Civic Democrats' Vlastimil Tlusty said Friday in an interview fro the newspaper Pravo on Friday that the deficit was more likely to be around twice that level at 173 billion crowns. That, Mr Tlusty warned, would scuttle Czech plans to adopt the single European currency in 2010.