The main Czech right-wing party opened campaigning for a May 28-29 general election on Wednesday with a pledge to create up to 265,000 jobs and a warning against loose fiscal policies that could lead to a debt trap.
The right-wing Civic Democrats, led by former Prime Minister Mirek Topolanek, lag in opinion polls and face a tough struggle to win enough votes to prevent a left-dominated parliament.
Jobs are among key campaign issues in the central European country of 10.5 million where the unemployment rate has doubled since 2008 to 9.9 percent last month. Voters will decide between tax-and-spend policies promoted by the leftist Social Democrats and right-wing prescriptions for spending cuts and pro-business reforms as a way to kick-start economic growth and cut the yawning budget deficit.
The Czechs have been able to finance themselves on the market throughout the financial crisis and their debt is below 40 percent of gross domestic product, low by EU standards.
But the debt stock has risen sharply and Topolanek told a news conference Czechs were not immune from a funding crisis.
"Hungary and Latvia are not too far from us, and our irresponsible behaviour brings closer the day when investors will refuse to finance our debt. This is the threat," he said, referring to fellow EU newcomers which have needed IMF bailouts.
The Civic Democrats promised to cut social charges paid by companies that create new jobs, give incentives to unemployed people who start their own business, make short-time working more flexible and ease restrictions on hiring and firing.
After a year of cautious caretaker government, analysts say markets hope for a decisive victory for either the right or the left, with a strong government able to push through its agenda.
But neither major party is expected to win a majority and opinion polls suggest several possible outcomes, from a minority leftist cabinet to a centre-left coalition or a grand coalition between the two main parties. A centre-right coalition is also an outside chance, according to polls.
The budget gap jumped to 6.6 percent last year after the economic crisis revealed deep structural deficits that had been hidden by fast economic growth in previous years.
Both right and left-wing parties promise to slash the gap below 3 percent of gross domestic product within two to three years, but analysts are sceptical that either has the political will to implement the necessary reforms.
The country has no target date for euro entry, and the main parties have said 2015-2016 is a possible timeline.
The Social Democrats plan to raise taxes on companies and high-earners to pay for their generous welfare agenda.
ReutersGüncelleme Tarihi: 18 Mart 2010, 00:17