May 11, 2018 / 10:26 AM / a year ago

Planned Czech govt to boost investments, defence spending -draft agenda

PRAGUE, May 11 (Reuters) - A Czech coalition government on course to take office next month would boost defence and social spending as well as infrastructure investments, according to a draft legislative agenda seen by Reuters on Friday.

The planned coalition between the centrist ANO party and the centre-left Social Democrats would, while maintaining a pro-western policy course, also keep the country outside the euro zone and extend its opposition to EU plans for quotas for relocating asylum-seekers, the draft showed.

Prime Minister Andrej Babis’s ANO was the clear winner of a national election in October, but it lacks a parliamentary majority and, with Babis facing allegations - which he denies - of European Union subsidy fraud from a decade ago, has struggled to win support from other parties.

But concessions to some of the demands made by the Social Democrats, including raising sick pay and child allowances and increasing salaries across the education sector by 50 percent by 2021, have now produced a draft coalition deal.

It remains subject to approval by the Social Democrats’ rank and file, however, and results of that vote are expected in early June.

Even if the coalition goes ahead - and some senior Social Democrats have spoken against entering the cabinet given Babis’s legal problems - it will still lack a majority in the lower house.

The pro-Russia and anti-NATO Communist party has said it would back the coalition in a confidence vote, which would mark the party’s first involvement with national government since the end of Communist rule in 1989.

On defence, the new government would pledge to boost spending to 1.4 percent of GDP from 1.05 percent last year, still far below the NATO guideline of 2 percent and near the bottom among NATO member states.

It would also look to stabilise debt relative to gross domestic product, which has dropped thanks to strong economic growth in the past three years and ended at 34.6 percent of GDP in 2017.

Babis’s current one-party cabinet has ruled in a caretaker capacity since it lost a parliamentary confidence vote in January. (Reporting by Robert Muller; editing by John Stonestreet)

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