New Czech government wins confidence vote in parliament

By bne IntelliNews February 19, 2014
The new centre-left Czech government of PM Bohuslav Sobotka that took power in late January won a vote of confidence in parliament on February 18, CTK news agency reported. Sobotka’s cabinet won the backing of the parliament four months after his Social Democratic Party (CSSD) narrowly won the October 2013 early elections.
Under the law, the government must call a confidence vote within 30 days of taking office. President Milos Zeman appointed the new cabinet on January 29.
The coalition government includes also centrist ANO of finance minister and billionaire Andrej Babis and the Christian Democrats. The ruling coalition was backed by 110 lawmakers in the 200-member parliament.
Sobotka’s appointment ends a seven-month power gap following the collapse of former centre-right government amid a bribery and spying scandal. The new government’s main task will be to help the economy resume growth after a record-long recession triggered by a three-year austerity drive of the previous cabinet that hurt domestic demand but also helped the country secure emerging Europe’s lowest borrowing costs.
Sobotka will pursue looser fiscal policies but will seek to keep the budget deficit below the EU’s limit of 3% of economic output. The cabinet will raise pensions and wages and will boost welfare and infrastructure spending as well as support the creation of jobs.
The three-party government has pledged not to raise taxes this year. As of 2015 it plans to lower the sales tax on drugs, books, baby food and diapers by introducing a third VAT rate. Currently there are two VAT rates of 15% and 21%. CSSD wants in 2015 to slap a levy on sectors such as banks and utilities that would raise some CZK 4bn (EUR 146mn) a year but Babis opposes any tax hikes on companies raising questions whether Sobotka will find money to pay for the higher spending. 
Sobotka favours a closer EU integration but has said that his government will most likely not set a target date for adopting the euro during its term through 2017. As a first step he plans the country to join the EU's fiscal compact, an agreement on budget responsibility.


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