* PM Necas crushes rebellion but coalition remains weak
* Necas pushes through tax package to cut deficit next year
* Wins vote to start pension reform
* More challenges lie ahead for Necas
By Robert Muller
PRAGUE, Nov 7 Czech Prime Minister Petr Necas
won a confidence vote in parliament and pushed through tax rises
and pension reform on Wednesday after quelling a rebellion that
threatened to bring down his centre-right government.
The lower house voted to raise value-added and income taxes
in a move aimed at narrowing the budget deficit next year after
a group of dissenting backbenchers in Necas's Civic Democratic
Party dropped their opposition to the legislation.
The rebellion was the biggest challenge to his two-year rule
and followed defections and coalition rifts that had steadily
stripped his government of its majority in the 200-seat lower
His victory removes an immediate danger for the government
but its weak position is likely to continue to complicate
"This is one of the votes that confirms confidence in the
government and allows it to set a state budget that respects a
deficit below 3 percent of GDP and that also includes pro-growth
measures," Necas said.
Tax hikes and spending cuts have pushed down borrowing costs
to all-time lows but have weakened domestic demand and tipped
the central European economy into a recession in late 2011.
Hit by a series of defections since the centre-right parties
won the country's largest parliamentary majority in a May 2010
election the three-party coalition now holds only 99 seats.
The government's tax measures - which were tied to a
confidence motion - were supported by 101 MPs, including a few
independents, with 93 MPs voting against.
That was a good result for Necas who will need that support
to overrule an expected veto from the opposition-controlled
Necas and his finance minister, Miroslav Kalousek from
conservative party TOP09, have repeatedly said the government
should quit if it can not push through its deficit-cutting
The tax package, expected to generate 22 billion crowns
($1.11 billion) in new revenue, will allow the government to
bring the total fiscal gap to below the European
Union-prescribed 3 percent of economic output next year.
A failure in the vote would have added Necas, a 47-year-old
trained physicist, to a long list of European heads of
government from Greece to the Netherlands who have been toppled
over austerity policies.
"The government has the worst behind it," said political
analyst Josef Mlejnek. "But I think that this government really
does not have legitimacy in the sense that it is a government
which is a de facto minority because it has to raise support for
every bill ad hoc among individual deputies."
The government will now submit a re-worked 2013 budget draft
to factor in the tax hikes. The budget will use a reduced 0.7
percent economic growth forecast for next year, following a 1
percent contraction this year.
In another victory for Necas, the lower house also cleared
the way for pension reform to get underway next year, giving its
final approval to legislation that will allow change.
The vote will mean Czechs will in time be able to divert
part of their social security payments to private pension
accounts from state ones.
The chamber was also expected to vote overnight to return
church property worth billions of dollars, confiscated by
totalitarian communist rulers in the 1940s and 1950s.
The tax package approved on Wednesday includes a 1
percentage point increase in the country's two value added tax
rates, to 15 percent and 21 percent. It also introduces an extra
7 percent tax for people earning more than 4,000 euros a month.