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Czechs vote in tight election race

Posted on: Friday, 2 June 2006, 10:36 CDT

By Jan Korselt and Jan Lopatka

PRAGUE (Reuters) - Czechs voted on Friday in a close general election fought between ruling Social Democrats who took the nation into the EU and promise a stronger welfare state, and right-wingers vowing to stop corruption and slash taxes.

The Czech Republic has enjoyed an economic boom under the centre-left coalition of Prime Minister Jiri Paroubek but a string of sleaze scandals damaged the government's standing after eight years in power.

The conservative Civic Democrats, who had a narrow lead in most opinion polls, campaigned hard on a pledge to root out graft and push reforms to make the ex-communist EU member's robust economic growth of over 6 percent sustainable.

Leaders of both parties took final shots at each other after casting their ballots.

"Voters must choose if they want to transform this country into the biggest laboratory in central Europe, where experiments from around the world will be conducted on them," Paroubek said, referring to Civic Democrat reform plans.

No party will win a majority in the two-day vote and several alliances are possible among five parties expected to win seats.

Investors view the vote calmly because the booming economy, low debt and inflation have made the country a safe haven among volatile central European markets.

The worst election outcome for investors is that Paroubek teams up with Communists, which would limit his scope for fiscal or pension reforms needed to keep the country on track for euro zone entry in 2010.

The Communists are set to end up as the third biggest force, after years on the political sidelines following the overthrow of communist dictatorship.

"For the first time since 1989, the Communists can grab real power, be it directly or indirectly," Civic Democrat leader Mirek Topolanek told reporters after casting his ballot.

Polling stations will close at 2000 GMT and re-open from 0600 until 1200 on Saturday, when preliminary results are due.

REFORM NEEDED?

Despite strong growth that has brought wealth per capita to about 75 percent of EU average and above that of "old" EU member Portugal, the Czechs face the same question as most of Europe -- how much welfare is sustainable.

Paroubek has pledged a continuation of reforms at a moderate pace while increasing social payments and sticking to his euro adoption target of 2010. He said he might cooperate with Communists if they back such an agenda.

Topolanek argues such policies will boost the budget gap, expected to be 3.6 percent of GDP this year, beyond euro zone limits and fail to reduce 8 percent unemployment.

He says that with the economy booming, pension and health reforms should accelerate. Reflecting his party's slightly eurosceptic line, he is vague on when the country of 10.5 million should adopt the euro.

The Social Democrats say Topolanek's tax cut plans would blow a hole in the budget, benefit only the rich and force Czechs to pay for health and education.

Many voters agree and are not swayed by the latest sleaze allegations by a senior police officer who accused Paroubek this week of hindering organized crime investigations.

"I can't tell who has been objective on this from either side so I am not deciding on the basis of the reports," said Katerina Spackova, a 35-year-old office worker.

"I want social security for families, and older people, which I fear a right-wing government will not deliver."

Source: REUTERS

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