Czech lawmakers override veto of bill boosting government's spending power

PRAGUE, July 8 (Reuters) - Czech government lawmakers in the lower house of parliament overrode a Senate veto early on Wednesday of a bill easing national fiscal rules, which critics say opens a path to ballooning debt in the coming years.

Lawmakers in the lower house approved the bill in May before it was returned by the Senate. The move on Wednesday now sends the bill to the president, who can either sign it or issue another veto, which would force another lower house vote.

The bill exempts a long list of road, rail, nuclear power plant and dam projects from calculations for budget deficits. It also extends an exemption given to defence spending if it exceeds 2% of gross domestic product.

The new bill also allows the government to raise spending by up to 10% under loosely defined security threats, which the opposition says is an unacceptable relaxation.

The country's independent budget watchdog has called the changes a fundamental weakening of fiscal discipline.

The government says it is necessary as current rules mandate impossible budget cuts. Finance Minister Alena Schillerova has said the cabinet would keep the deficit under 3% of GDP - the ceiling mandated by the European Union.

The government, led by the populist ANO party, took power at the end of 2025 and has pledged to reverse pension reforms and increase spending, while introducing a subsidy on power prices and some tax cuts.

The previous government made fiscal consolidation a pillar of its rule and brought the deficit back below the EU's 3% of GDP ceiling to 2.1% in 2025.

Under current plans, the deficit should rise to 2.6% of GDP this year and 2.8% in 2027 before declining again.

Debt would peak at 46.8% of GDP next year, still well below EU averages.

Opposition politicians have said they would challenge the bill at the Constitutional Court.

(Reporting by Jason Hovet; Editing by Thomas Derpinghaus)