Czech 2026 deficit target can stay unchanged to pass budget quickly, poll winner says

PRAGUE (Reuters) -Czech populist party ANO, on track to form the next government after winning an election this month, said on Friday it could keep the outgoing cabinet's proposed 2026 deficit target in order to pass a budget before year-end.

The outgoing centre-right government of Prime Minister Petr Fiala has brought public finances back within European Union rules. However, analysts expect fiscal loosening under ANO, which is led by billionaire former Prime Minister Andrej Babis.

The outgoing government has submitted a central state budget draft with a deficit of 286 billion crowns ($13.74 billion), up from 241 billion seen in 2025.

The next government could use that as a foundation to move the legislation ahead without delays, ANO official Alena Schillerova told reporters on Friday.

The country would face a provisional budget limiting spending at the start of 2026 if lawmakers fail to approve a budget law by the end of December, which could hurt investments.

FIGHT OVER BUDGET

Fiala's budget bill fell through when parliament ended its term following an election on October 3 and 4, and ANO has pressed his government to re-submit the draft to avoid delays if the next administration has to start from scratch.

Fiala has said he would consider this. Parliament would have to approve the re-submitted deficit target without changes to move the legislative process forward.

ANO is in talks on forming a ruling coalition with the far-right SPD party and the right-wing Motorists that will have a majority in parliament. Babis is due to update the president on Monday on the talks.

The new parliament first meets on November 3, and Babis's potential government is likely to be in place by December, perhaps sooner.

CHANGES ONLY AFTER DEFICIT TARGET FIXED

Schillerova said changes to the budget draft would be made in the bill's second reading, when money can be shifted among chapters, but overall revenue and spending figures cannot change.

"We will definitely change (the current draft) in a second reading so that it is approved by the end of the year and we don't have to go into a provisional budget," she said.

Approved budgets can still be amended later in the year.

Fiala's government has cut the overall fiscal gap to around 2% of gross domestic product, below an EU ceiling of 3%.

ANO campaigned on promises to cut taxes, lift wages and pensions, and spend on benefits such as mortgage subsidies. However, the Motorists back fiscal discipline and may temper some of ANO's spending aims.

($1=20.8210 Czech crowns)

(Reporting by Jason Hovet; Editing by Clarence Fernandez)