May 28, 2010 / 12:55 PM / 9 years ago

Czechs vote in hope to end policy deadlock

PRAGUE (Reuters) - Czech voters wary of debt and angry about graft voted for a new government Friday, with polls forecasting a tight result that could lead to protracted coalition talks and extend a decade of delays to reforms.

A man rides his bicycle past an election poster of the Civic Democratic Party, picturing their leader Petr Necas (L) and leader of the opposing Social Democrats Jiri Paroubek (R), in north Moravian town of Ostrava, May 26, 2010. The poster reads:"Your vote will decide". REUTERS/Petr Josek

The two-day election pits poorer and older voters against younger and wealthier city-dwellers who clash over how to handle the Czech Republic’s budget, thrown into deeper deficit by the economic crisis.

Rightist parties warn of a Greek-style economic meltdown, while leftists pledge to cut spending but boost taxes for high earners and firms to fund higher welfare payouts.

The leftist Social Democrats lead opinion polls. But they will fall short of a majority and may find it difficult to find coalition partners to form a strong government and push through its welfare agenda. It may even be forced into opposition.

Analysts fear an inconclusive result will lead to months of political wrangling over a new cabinet, rattling markets and causing further delays to pension, welfare and healthcare reforms where the Czechs have long lagged their peers.

The central European country, a member of the European Union and NATO, has been slowly recovering from a 4.1 percent economic drop under a caretaker cabinet led by Prime Minister Jan Fischer for the past year. The 2010 budget deficit is projected at 5.3 percent of gross domestic product.

Heather Conley, director of the Europe Program at the Center for Strategic and International Studies in Washington, said lengthy talks would hold back the needed policy changes.

“I hope it’s quick and I hope they can develop an enduring platform to pursue continued reforms,” she said.

Polling stations opened at 8 a.m. EDT and were to close at 4 p.m., and voting will continue from 2 a.m. until 8 a.m. EDT on Saturday. Early results are expected by Saturday evening.

LACK OF CLARITY

Mainstream Czech newspapers have been highly critical of Social Democrat leader Jiri Paroubek for his divisive style and for overthrowing a center-right cabinet last year to throw the country into chaos during its term as EU president.

Leading daily Mlada fronta Dnes called on voters to block a Social Democrat cabinet backed by the Communists, heirs to the totalitarian party whose rule ended in 1989.

“Such a result would bring unbearably high risks for the country’s politics, economy and foreign relations,” it wrote in an editorial. Paroubek has accused the media of being biased.

The country of 10.5 million people has government debt equivalent to 35 percent of GDP, just half the EU average.

But economists say that figure will grow fast without reforms and could threaten the country’s solid credit ratings that are higher than some euro zone states. They say a rightist government would better implement badly needed cost cuts and reforms to a pension system burdened by an aging population.

“We will make deep structural reforms and balance the budget by 2017,” Civic Democrat leader Petr Necas said in the final television debate late Thursday.

A string of corruption scandals has hit the big established parties, especially the Civic Democrats, who trail the Social Democrats 3.4-11.5 points in polls.

Disillusionment at mainstream parties have helped lift smaller groupings such as the conservative TOP09 and the anti-graft Public Affairs party. Analysts say the Civic Democrats could potentially form a majority coalition with them.

“What can I do? As an entrepreneur, I will vote for the right, but I don’t have a particularly high opinion of it, and anyway the whole situation sucks,” said Jan Novak, 35.

Additional reporting by Roman Gazdik, editing by Mark Trevelyan and Mark Heinrich

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