Czech lawmakers return 2026 budget to outgoing government for more work

PRAGUE (Reuters) -The Czech lower house voted late on Wednesday to return the 2026 draft budget to the outgoing government for re-working, raising chances of a legislative delay and higher-than-expected deficit.

Czech billionaire Andrej Babis' populist ANO party, winner of an October election and leading talks on forming the next government, has sparred with the outgoing centre-right cabinet over its 2026 budget plan, saying it lacks billions of euros to cover expected expenses.

While the outgoing government has concentrated on budget consolidation to cut the fiscal deficit below European Union rules, analysts expect some loosening based on ANO campaign promises to boost wages, cut some taxes and spend more.

Lower house lawmakers voted 105-64, led by ANO and its coalition partners, in favour of returning the draft budget in a session that ran late into Wednesday.

20 DAYS FOR NEW DRAFT

The outgoing government has 20 days to amend the draft. It has said it could not legally raise the deficit further.

This month it re-submitted the 2026 budget plan with a deficit target of 286 billion crowns ($13.72 billion), up from 241 billion expected in 2025.

ANO, which aims to form a government by mid-December, has said the budget was missing nearly 100 billion crowns for transport infrastructure and other spending.

Its nominee for finance minister, Alena Schillerova, told Czech Television on Wednesday that a realistic plan must be drawn up even at the cost of increasing the deficit.

Finance ministry forecasts put the fiscal deficit - which includes the budget as well as local and regional administrations, the health insurance system and various off-budget funds - at 1.9% of GDP in 2026, the same as this year.

That is below the EU's ceiling of 3%.

The budget dispute raises risks the plan may not pass through parliament by the end of the year, leaving the country to enter 2026 on a provisional setting that limits spending to 1/12th of last year's expenditure per month.

($1=20.8490 Czech crowns)

(Reporting by Jason Hovet; Editing by Clarence Fernandez)