The three parties won an unusually large majority in an election last month, giving them a mandate for fiscal austerity and allowing the formation of the strongest Cabinet the former communist country has had since the early 1990s.
The central European EU member has relatively low debt and has avoided funding problems in the financial crisis. But the economy suffered from a sharp drop in west European demand and the government must rework its fiscal framework to stem a sharp rise in borrowing.
Prime Minister Petr Necas's Civic Democrats (ODS), the strongest center-right party, took 6 of the 15 Cabinet positions including defense and industry.
But they gave the finance, labor and social affairs, health, foreign and interior ministries to their coalition partners, the conservative TOP09 and centrist Public Affairs.
Miroslav Kalousek, vice-chairman of TOP09, will return to the Finance Ministry, which he ran from 2007 to 2009 in a center-right Cabinet that collapsed last year.
"We are aware as a party that budget responsibility is the biggest priority," said TOP09 leader Karel Schwarzenberg, a popular pipe-smoking 73-year old aristocrat who will return to the foreign ministry. The party got five cabinet seats.
Kalousek, an advocate of fiscal austerity and opponent of tax hikes, cut the budget deficit to 0.7 percent of gross domestic product in 2007 but was slow to respond when the economy fell into recession, allowing sharp deficit growth.
Economists have said it was appropriate to allow a bigger budget gap to counterbalance the drop in output.
The outgoing Cabinet had pledged to cut the gap to 3 percent of gross domestic product in 2013, from 5.9 percent last year.
Necas said on Wednesday the parties agreed to take a more aggressive route, cutting the deficit next year to 4.6 percent at most, versus the previous plan of 4.8 percent.
"There is a clear framework for how these parties will prepare the budget for the next year; there will be savings of 54 billion crowns ($2.57 billion)," Necas said.
Czech public debt was just 35.4 percent of GDP last year, less than half the European Union average, but welfare, pension and health care cost will raise that burden quickly without reform. The coalition also wants to take the axe to operating spending and investments.
The finance ministry expects the economy to grow 1.5 percent this year and 2.4 percent in 2011, and the incoming cabinet has not raised worries that fiscal austerity will hurt the recovery.
