Czech Finance Ministry eyes CZK 153.2 billion in 2010 state bonds

The Czech Finance Ministry plans to borrow about half of its estimated record financing needs this year through state bonds to help cover an expected fiscal deficit of 162.7 billion crowns (8.83 billion dollar).
Public finances have emerged as the main battleground ahead of an expected May parliamentary election, with leftist parties pushing for more spending to ease the pain of economic crisis against warnings of long-term consequences from the right.
The EU member of 10.5 million has approved a budget gap of 5.7 percent of gross domestic product for this year, easing from an estimated 6.6 percent in 2009 but a figure the interim cabinet and right-of-centre parties say is still too high.
The ministry said on its Website it would propose issuing 153.2 billion crowns ($8.32 billion) in state bonds this year to help cover the planned fiscal deficit in a draft law at a government meeting on Monday.
If approved, it would cover over half of up to 292 billion crowns the ministry has forecast for 2010 borrowing. In December, the ministry said it could borrow up to 140 billion crowns on foreign markets.
The Finance Ministry estimates gross borrowing needs will gradually increase to about 313 billion crowns in 2012 as budget gaps stagnate at high levels and debt maintenance costs rise.
Economists say if efforts are not made quickly to rein in public finances, it could take years for the small and open central European economy to claw back to a deficit ceiling of 3 percent of GDP level required to join the euro zone.
In a crisis that has seen budget gaps spike to double digits in the United States, and some EU states, the Czechs have seen their expected 4 percent economic contraction in 2009 hammer budget revenues and drive up social spending, with the 2009 public deficit tripling over original plans.
Unlike fellow EU members Romania and Hungary, they have not needed rescue aid from the International Monetary Fund and have fared about as well on the fiscal side as Poland, the only EU state to avoid economic contraction this year. Adhering to the fiscally-prudent line endorsed by right-of-centre parties, Prime Minister Jan Fischer's caretaker government has pushed through a $4 billion package of tax hikes and spending cuts to rein in the shortfall.