PRAGUE—Leaders of three Czech center-right political parties worked to assemble a governing coalition Monday after an unexpectedly strong showing in parliamentary elections over the weekend, setting the stage for spending cuts in step with a broader European shift toward fiscal austerity.

Led by the Civic Democrats, the three parties captured nearly 48% of the popular vote, winning a combined 118 seats in the 200-seat lower house of the Czech legislature. That would give the grouping the largest majority of any government since the country’s creation in 1993.

Czech President Vaclav Klaus, whose duties include authorizing a prime minister-designate to form a government, told reporters Monday he saw no realistic alternative to the three-party center-right coalition.

Prospects for a stable government intent on reining in state spending and revamping the country’s pension system were cheered by investors. The Czech currency, the koruna, strengthened against the euro, and the country’s stocks also gained.

The Civic Democrats and their likely partners campaigned with vows to prevent a Greek-style crisis in the Czech Republic, even though the country is in far sounder fiscal shape than Greece and other European states with debt woes. The national debt—equal to about 35% of gross domestic product—is less than half Europe’s average. But it could mount without changes in social-welfare programs.

Czech policy makers, like their counterparts in other European capitals, are having to weigh the benefits of tighter government-spending limits against the risks budget austerity poses for nascent recoveries in national economies as well as for the region and the world.

The Czech Republic’s gross domestic product shrank 4.1% last year and is expected to grow 1.5% this year. Analysts caution that overly tight fiscal policies could slow expansion.

During an appearance on Czech television Sunday, Petr Necas, the Civic Democrats’ leader, said his party would aim to shrink the budget deficit to about 4% or 4.5% of GDP, narrower than the targets set by the current caretaker government. „It is our duty to be more ambitious,” Mr. Necas said.

Public reaction to fiscal-austerity plans has been mixed as governments across Europe push ahead with proposals to limit spending. In Romania, where the government intends to cut public-sector wages 25%, tens of thousands of teachers and civil servants went on strike Monday, and transport workers in the capital, Bucharest, urge a one-day walkout Tuesday.

Czech voters also showed ambivalence about austerity measures. The center-left Social Democrats, who had promised to boost welfare payments and shrink the deficit by raising taxes, received the most votes of any single party in the election, held Friday and Saturday.

But its vote tally—with 22.1% of the popular vote and 56 seats in the lower house—fell far short of the outcome forecast by opinion polls in the run-up to the elections. Polls had suggested the Social Democrats would win about 30% of the vote.

„The onslaught of assertions that we are going down the road of Greece unless we start saving” may have pushed voters toward center-right parties, said political analyst Jiri Pehe, director of New York University’s Prague campus.

But Mr. Pehe said much of the election dynamic appeared driven by distaste for politics as usual and for the two big parties, the center-left Social Democrats and the center-right Civic Democrats. Both did significantly less well than in the 2006 elections. „People just said, ‘enough and enough,’ and gave their support to new parties,” including the center-right TOP 09 and Public Affairs parties, Mr. Pehe said.

Read the article on Wall Street Journal

Czech Vote Presages Spending Cuts

PRAGUE—Leaders of three Czech center-right political parties worked to assemble a governing coalition Monday after an unexpectedly strong showing in parliamentary elections over the weekend, setting the stage for spending cuts in step with a broader European shift toward fiscal austerity.

Led by the Civic Democrats, the three parties captured nearly 48% of the popular vote, winning a combined 118 seats in the 200-seat lower house of the Czech legislature. That would give the grouping the largest majority of any government since the country’s creation in 1993.

Czech President Vaclav Klaus, whose duties include authorizing a prime minister-designate to form a government, told reporters Monday he saw no realistic alternative to the three-party center-right coalition.

Prospects for a stable government intent on reining in state spending and revamping the country’s pension system were cheered by investors. The Czech currency, the koruna, strengthened against the euro, and the country’s stocks also gained.

The Civic Democrats and their likely partners campaigned with vows to prevent a Greek-style crisis in the Czech Republic, even though the country is in far sounder fiscal shape than Greece and other European states with debt woes. The national debt—equal to about 35% of gross domestic product—is less than half Europe’s average. But it could mount without changes in social-welfare programs.

Czech policy makers, like their counterparts in other European capitals, are having to weigh the benefits of tighter government-spending limits against the risks budget austerity poses for nascent recoveries in national economies as well as for the region and the world.

The Czech Republic’s gross domestic product shrank 4.1% last year and is expected to grow 1.5% this year. Analysts caution that overly tight fiscal policies could slow expansion.

During an appearance on Czech television Sunday, Petr Necas, the Civic Democrats’ leader, said his party would aim to shrink the budget deficit to about 4% or 4.5% of GDP, narrower than the targets set by the current caretaker government. „It is our duty to be more ambitious,” Mr. Necas said.

Public reaction to fiscal-austerity plans has been mixed as governments across Europe push ahead with proposals to limit spending. In Romania, where the government intends to cut public-sector wages 25%, tens of thousands of teachers and civil servants went on strike Monday, and transport workers in the capital, Bucharest, urge a one-day walkout Tuesday.

Czech voters also showed ambivalence about austerity measures. The center-left Social Democrats, who had promised to boost welfare payments and shrink the deficit by raising taxes, received the most votes of any single party in the election, held Friday and Saturday.

But its vote tally—with 22.1% of the popular vote and 56 seats in the lower house—fell far short of the outcome forecast by opinion polls in the run-up to the elections. Polls had suggested the Social Democrats would win about 30% of the vote.

„The onslaught of assertions that we are going down the road of Greece unless we start saving” may have pushed voters toward center-right parties, said political analyst Jiri Pehe, director of New York University’s Prague campus.

But Mr. Pehe said much of the election dynamic appeared driven by distaste for politics as usual and for the two big parties, the center-left Social Democrats and the center-right Civic Democrats. Both did significantly less well than in the 2006 elections. „People just said, ‘enough and enough,’ and gave their support to new parties,” including the center-right TOP 09 and Public Affairs parties, Mr. Pehe said.

Read the article on Wall Street Journal

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