The Czech centre-right government Wednesday approved the country’s draft budget for 2008 with a deficit under 3% of the gross domestic product (GDP), Czech Finance Minister Miroslav Kalousek told reporters.
The draft budget thus meets a recent recommendation by the European Commission that asked the country to draft a 2008 budget with a gap under 3% of GDP. The low budget deficit is a crucial condition for switching to the euro - the common currency of the European Monetary Union. The draft budget outlines a deficit of 70.8 billion koruna ($3.59 billion) or 2.95% of GDP, as the cabinet expects revenues of 1,036.5 billion koruna ($52.3 billion) and expenditures of 1,107.3 billion koruna next year. The cabinet approved the draft unanimously, Kalousek said.
Despite the booming economy, which has grown up to 6% in recent years, spendthrift Czech governments have been lax about keeping the budget gap tight. The deficit is expected to reach 4% of GDP this year. Sprawling deficits have already caused the government to scrap 2010 as its planned target for adopting the common European currency. While a new date has not been set yet, the finance minister said earlier that he would prefer to introduce the euro in 2012. The government wishes to further slash deficits in 2009 and 2010 when it plans to cut the budget gap to 2.6 and 2.3% of GDP respectively. The draft budget will now be passed on to a tightly-divided lower house, where the coalition can muster at most a majority of two votes. If passed, the budget should make it smoothly through the Senate. (m&c.com)