PRAGUE: Ministers and experts from the three parties in the Czech Republic's ruling coalition agreed on Tuesday on savings to cut the budget deficit, giving a positive sign before leaders' talks on the survival of their allince, a source said.
Prime Minister Petr Necas has said those talks would determine if he keeps the centre-right cabinet afloat or triggers an early election.
The worst crisis in the alliance's rule broke out last week when its smallest member, Public Affairs, surprised its partners by demanding changes in the judiciary, welfare distribution, and a cabinet reshuffle.
The coalition still needs to bridge a number of remaining differences but the budget is the most important issue at stake.
"I think there will be no (early) election, there is an agreement on savings measures," said the source, who was present at the experts' meeting.
Necas said in a newspaper interview on Saturday he saw a 50-50 chance of government survival.
Most political commentators see the total collapse of the two-year-old government as unlikely as opinion polls show an early election would bring the opposition Social Democrats to power.
Public Affairs has rowed back from a threat to resign, signalling it was willing to reach an agreement. Its support has plunged from 10.9 percent won in the 2010 election to just over 1 percent, making early polls highly undesirable for it.
The party has tried to differentiate itself from its coalition partners as the protector of poorer Czechs suffering from the austerity steps.
Public Affairs has had an internal dispute over whether to leave the cabinet and Necas has hinted he could be content with winning over a faction of the party big enough to give the cabinet a safe majority in parliament if there is a split.
Commentators and political rivals have said Public Affairs triggered the row in part to divert attention from a trial where their most influential official, Vit Barta, is accused of bribing party colleagues to keep their loyalty.
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The centre-right Civic Democrats led by Necas and the conservative TOP09 party of Finance Minister Miroslav Kalousek are pressuring Public Affairs to accept measures to save 42.4 billion crowns next year and twice as much in 2014 in order to bring the budget gap below 3 percent of gross domestic product.
The source from the experts' meeting said there was an agreement to hike the value-added tax by 1 percentage point next year and to raise health insurance for high earners. More details were not immediately available.
Also under discussion was a new tax for high earners and a slowdown in the growth of pensions.
Austerity measures have added to already weak household demand to pull growth just below zero in the second half of the last year, according to preliminary figures.
Most Czechs have turned against the cabinet that has already had to tighten spending and hike taxes, while facing a series of graft scandals.
"We think this government has created the types of reforms that hit the most vulnerable: families with kids, the sick, the unemployed, and those with the lowest incomes," said 28-year-old student Anezka Polaskova, as she tried to muster support for a demonstration against government reforms scheduled for April 21.
"We want a party that is socially sensitive."