Czech PM Necas: Soften austerity drive to help economy - paper

Sat Nov 10, 2012 8:34am EST
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PRAGUE (Reuters) - The Czech government must change tack to help the economy out of a recession and "stop scaring" the public with further budget tightening, Prime Minister Petr Necas was quoted as saying on Saturday.

Pressure has been building on his centre-right cabinet to ease its austerity zeal after the economy slid into a recession and Necas's Civic Democrats suffered a drubbing in regional and Senate election last month as voters punished them for spending cuts and sleaze scandals.

"We have to stop all the scaring of people and show them a light at the end of the tunnel," daily Mlada Fronta Dnes quoted Necas as saying.

He said the government should back off from pursuing tough deficit targets while the economy remains weak.

This is the first time Necas has said the cabinet must alter its policy focused primarily on trimming debt, although he stopped short of admitting what many economists have said, that the government's stubborn fiscal cuts significantly contributed to the three-quarters old economic recession.

Government spokesman Jakub Stadler said the remarks were Necas's personal opinion which he will discuss with the rest of the government and it was not yet decided what the new deficit targets will be.

The Czech central bank cut its main policy rate to near zero to spur spending and central banker Pavel Rezabek took a rare swipe at the government in a Reuters interview last month, saying it should stop undermining the bank's efforts to drag the economy out of recession.

Necas said poor demand was a "psychological matter", meaning people and businesses constantly hearing of plans for budget cuts and economic crisis in the euro zone prefer to stash money in their bank accounts in anticipation of bad times ahead rather than spend and invest.

"Ministers should not longer scare people but they should give them hope... because the government's consolidation effort has brought results," the paper quoted him as saying.   Continued...

Czech Prime Minister and chairman of the Civic Democratic Party (ODS) Petr Necas (L) attends the party's congress in Brno November 4, 2012. REUTERS/Petr Josek