UPDATE 1-Czech party may quit over EU fiscal treaty

Thu Jan 12, 2012 1:02pm EST

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PRAGUE Jan 12 (Reuters) - Leader of Czech coalition party TOP09 Karel Schwarzenberg said the country should back a new EU fiscal treaty or ministers from his party would quit, daily Lidove Noviny newspaper reported on Thursday.

Schwarzenberg told Czech Television, however, that he was not giving an ultimatum to Prime Minister Petr Necas.

"I only said, and I am sticking to that, that if we move to the periphery of European integration, it would be indigestible."

Schwarzenberg's comments to the newspaper raised the risk of a collapse of the Czech government, which had already averted a breakup this week in a row over church property and faces divisions over European integration.

EU officials agreed to a new treaty in December, aiming to push ahead with deeper economic integration and tackle a euro zone debt crisis.

The Czech government has yet to give a clear indication of whether it would join the treaty, which European Council President Herman van Rompuy has said should be signed by EU states by early March.

"I will not sit in a government which will lead the Czech Republic outside the mainstream of European integration," Schwarzenberg told the newspaper.

"It is our fundamental interest to sit at a table and participate in the essential decisions that influence us strongly."

The new treaty would impose automatic sanctions for countries which breach EU fiscal rules requiring budget deficits to be kept below 3 percent of gross domestic product and debt levels below 60 percent of GDP.

Necas has maintained the government would only make its position clear once details of the compact are agreed.

The Czech total fiscal deficit is estimated at 3.7 percent of GDP in 2011. The government debt is around 40 percent of GDP.

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