UPDATE 1-Divided Czechs vote, inconclusive result feared

* Tight result expected later on Saturday

* Both right and left-wing governments possible

* Exit polls due at 1200 GMT

(Writes through with polls open, quotes)

By Michael Winfrey and Robert Mueller

PRAGUE, May 29 (BestGrowthStock) – Czechs voted on Saturday in an
election likely to produce no clear winner, with the country
split over leftist promises to ward off economic crisis and
right-wing warnings such policies would lead to bankruptcy.

Political analysts say an inconclusive result could lead to
yet another weak government, extending a decade-long logjam in
structural reforms that has caused the Czech Republic to lag
behind other European Union newcomers.

Social Democrats backed by mostly older and less well off
Czechs are expected to win the most votes in the two-day poll
but fall short of a majority, with the country of 10.5 million
divided over whether to cut spending or raise welfare benefits.

Drawn-out coalition talks could rattle investors who want a
decisive government to shepherd a nascent recovery in the NATO
member state after its economy fell 4.1 percent last year.

A main concern is whether officials can rein in a budget
deficit that hit 5.9 percent of annual output last year and
enact changes to pension, healthcare and welfare systems that
have changed little in the 21 years since the fall of communism.

“The country may either face the rule of a leftist
government or a grand coalition of parties which have little in
common or a multi-party project deemed to be unstable,” said
Gyula Toth, an economist at bank Unicredit.

“This outcome could obviously have negative implications on
potential budget deficit reduction hopes.”

Exit polls will be released when polling stations close at
1200 GMT to wrap up the two days of voting. Results will come in
during the afternoon and evening. Media reported high turnout
and said final turnout could top 70 percent.


As many as eight parties could win seats, which could
produce potential coalitions of many parties including a tie-up
of the two main groupings, the latter of which analysts say
could weaken reforms and potentially increase corruption.

But the main election issue is the budget, with the Civic
Democrats invoking the Greek crisis to warn that Social Democrat
leader Jiri Paroubek would bring about economic meltdown if
allowed to take power.

“I believe in a success that will allow for the creation of
a government of fiscal responsibility, based on a centre-right
coalition,” Civic Democrat leader Petr Necas said after voting
on Friday.

Pavla Nechutova, a 33-year-old newly on maternity leave,
said pledges by leftist parties to raise social spending would
create too much debt that will have to be paid back later.

“I don’t want anything orange or red to govern,” she said
after voting, referring to the colours of the Social Democrats
and Communists. “That means nonsensical laws, and more debt. I
don’t want to work all my life just paying that back.”

Analysts say fear of bankruptcy may be overblown, as public
debt of 35 percent of gross domestic product is half of the EU
average. But they add that an ageing population — retirees are
expected to outnumber workers by 2050 — will create large
deficits in the pay-as-you-go pension system.

The Civic Democrats have proposed private pension accounts,
while the Social Democrats say no change is needed for now.

Interim Prime Minister Jan Fischer, who took power a year
ago after a Civic Democrat government collapsed a year ago, has
promised to hand over budget options to whichever type of
government emerges from the election and subsequent talks.

It would ensure either side can cut the deficit to the
EU-prescribed level of 3 percent of GDP by the Civic Democrats
target of 2012 or a year later for the Social Democrats, with
market watchers preferring the rightist party’s scenario.

Many Czechs say the worst result would be a Social Democrat
minority government backed by the hard-left Communists, heirs to
the totalitarian regime that ruled until the 1989 Velvet
Revolution and a party considered anathema in Czech politics.

“I was at the demonstrations 20 years ago. I lived through
Communism and I don’t want my children to live through the same
thing,” said 42-year-old accountant Helena Bambasova.

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UPDATE 1-Divided Czechs vote, inconclusive result feared