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Weak economy is Czech election top topic

Weak economy is Czech election top topic
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The Czech economy has been the main focus of the election campaign. Although the country is in as better state than some of its central European neighbours, its budget deficit urgently needs to be reduced.

Last year the economy shrank by 4.2%, but this year it is expected to grow by 1.4%. Public debt was 35.4% of GDP in 2009, and the budget deficit hit 5.9% of GDP.

Tomas Sedlacek, Chief Macroeconomic Strategist with the CSOB financial group, said the country does have a good social safety net: “The Czech Republic has been for many many years, of the OECD countries, the least likely to get into poverty. The number of people that are at risk of poverty is the lowest, because of our very generous social system.”

Areas like unemployment benefits and pensions are the main target for cuts by the right wing Civic Democratic Party, the ODS. It has said it can halve the budget deficit, getting it under 3% of GDP by 2012 and would balance the budget by 2017.

The Social Democrats of the CSSD promise they could achieve the same but it would take slightly longer. They would do that by raising taxes for the highest wage earners and companies, which they say would allow them to maintain benefits.

The plan is for the country comply with the European Stability Pact, even though the idea of joining the euro has been put on hold indefinitely.

KB Bank analyst Miroslav Frayer told euronews: “The deficit problem has to be sorted out, all the more so as the European Monetary Union is certainly going to toughen up the requirements for admission into the euro zone.”

The new government will also have to step up the fight against corruption. According to Transparency International, corruption in the Czech Republic means the state loses nearly eight billion euros annually, about same amount as the deficit.