Prague (Reuters) - Czech leftist parties torpedoed chances of a November early election on Tuesday, deepening uncertainty over eroding state finances that the caretaker cabinet warned could eventually cause a meltdown.
The leftist Social Democrats and the far-left Communists rejected an earlier agreed plan to dissolve the lower house of parliament on Tuesday and allow for an election, effectively
killing the motion before it got to a vote.
The expected delay deepens weeks of political turmoil and transforms Jan Fischer's non-partisan cabinet, originally set up to prepare for an early vote, into a government that must try to coerce parties into tax hikes and savings.
The prime minister said he was ready to stay on until the end of the regular term in June 2010 -- but only if parties commit to tax hikes and spending cuts necessary to slash the budget gap. Otherwise, he said he would quit.
The about-face also deepens acrimony between the two main parties, the right-wing Civic Democrats, whose government fell during its European Union presidency in March, and the Social Democrats.
Social Democrat chief Jiri Paroubek said his party had scuppered the election plan because it could be legally challenged, an unacceptable risk after the constitutional court killed a previous attempt to hold early polls last week.
"This option ... is unacceptable for the Social Democrats," Paroubek said. "The Czech Republic now needs a stable government more than ever and the cabinet of Jan Fischer must assume this responsibility."
Political analysts said that while Paroubek may be right about some legal risk to the election, here was also a political motive -- hopes that the economic crisis and rising unemployment could boost support for the left.
Delay could help budget
The interim government expects the 2010 budget gap to reach 7.4 percent of gross domestic product.
Fischer said he required that the parties agree to cut the gap to 5 percent through tax hikes and spending cuts, a move grudgingly supported by the right but not by the left.
Some analysts said that the delay could actually help the budget because of Fischer's pressure, the fact that the budget won't fall victim to the populist election promises, and the fact that parliament will keep working without interruption that would be caused by the election.
"It is definitely good news for next year's budget," said Tomas Sedlacek, chief macroeconomic strategist at bank CSOB.
"First, because we will avoid a provisional budget... second, it seems that the Fischer government set a relatively restrictive budget as a condition for its existence."
The Social Democrats' about-face was the latest move sowing deep political chaos in recent months.
The country originally called an early election for October, but that was invalidated by the Constitutional Court last week.
Parties then agreed to dissolve parliament and hold the election on Nov. 6-7.
The Czech crown was virtually unchanged after the decision and later traded firmer alongside other regional currencies.
