Czech Premier Seeks to Keep Majority as Ally Splinters

Czech Premier Petr Necas will seek to preserve his parliamentary majority after the smallest party in the ruling coalition splintered amid government efforts to cut the budget deficit.

Necas will hold talks in Prague with Deputy Premier Karolina Peake after she announced her exit yesterday from the Public Affairs party over “its destructive political style.” Seeking to form a new faction, Peake said she will remain in parliament and support the Cabinet, according to an e-mailed statement. Public Affairs deputy Viktor Paggio said he would follow her.

Necas’s 20-month old administration needs to push through measures including tax increases and a cut in spending on pensions to trim the deficit to within the European Union limit of 3 percent of gross domestic product next year. The plan has helped attract investors into Czech bonds, pushing the government’s borrowing costs to a record low.

“My only question is, whether our government has majority support in the Chamber of Deputies, and we need an answer to this within hours or days,” Finance Minister Miroslav Kalousek, a member of the TOP09 party, told reporters today before a regular government meeting. “We are waiting for positions of individual deputies of public affairs as to whether the government has, or doesn’t have a majority.”

Seats in Parliament

Necas’s Civic Democrats and TOP09 hold 93 seats in parliament, while Public Affairs had 21 deputies before Peake’s exit. State newswire CTK reported that at least two more Public Affairs deputies were following Peake and Paggio. Necas will hold talks with “all relevant” parties, CTK quoted him as saying late yesterday.

The premier overcame a rebellion by Public Affairs’ leadership last week and united his government behind a plan to cut spending and boost revenue. The government wants to reduce the deficit to 2.9 percent of GDP next year, from a targeted 3.5 percent in 2012, before balancing public finances in 2016.

Measures to narrow the fiscal gap, including an overhaul of the pension system, have helped curb funding costs. The yield on the Czech Eurobond maturing in 2021 fell to an all-time low of 3.276 percent yesterday, according to data compiled by Bloomberg.

The koruna has strengthened 3.4 percent to the euro since the start of the year, the eighth-biggest gain among 25 emerging-market currencies tracked by Bloomberg. It traded little changed at 24.757 per euro at 9:10 a.m. in Prague.

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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