Some signs of compromise in Czech stalemate

CZECH REPUBLIC: President Vaclav Klaus has warned the Czech Republic that fresh elections may be the only way to resolve political deadlock between the country's two main parties.

Seven weeks after left- and right-wing blocs each took 100 seats in elections, the two sides have failed to forge a coalition or agree on a new parliamentary speaker, whose appointment is essential to allow a change of government.

"I cannot put up with this stalemate forever," Mr Klaus told Czech media. "We must have a breakthrough. If this doesn't happen, the parties must decide whether they prefer to form a non-political government for some time, or new elections. There are no other alternatives."

Outgoing Social Democrat prime minister Jiri Paroubek has suggested forming a so- called government of experts or a coalition with the election-winning Civic Democrats, as long as they agree to drop some of their key campaign promises.

Mirek Topolanek, leader of the centre-right Civic Democrats, has so far fought for a three-party coalition with the smaller Greens and Christian Democrats, but is now showing some willingness to compromise on plans for major liberal reforms.

He advocates an overhaul of public services to cut state spending and backs a flat tax rate to woo foreign investors - moves that the Social Democrats strongly oppose.

While strong Czech economic growth has reassured financial markets during the political impasse, some analysts fear prolonged deadlock will delay fiscal reforms that are needed to cut the budget deficit and prepare for adoption of the euro in 2010.

The search for compromise is hampered by fresh memories of a vicious election campaign.

Mr Paroubek threatened to sue opponents for accusing him of having links to the Prague mafia and molesting the young daughter of a friend, while two members of the main parties brawled on stage during a conference.