PRAGUE (Reuters) - The Czech cabinet approved a constitutional amendment on Monday aimed at avoiding any future explosion in government borrowing by setting a limit on state debt which governments will have to observe, a spokesman said.
If approved by parliament, the bill would bring Czech law into line with the European Union's "fiscal compact", introduced in the wake of the debt crisis and now adopted by all member states except Great Britain and Croatia.
Debt is not an acute problem for the central European country. At 43.2 percent of gross domestic product (GDP) last year, the Czech burden is less than half of the EU average, and borrowing costs at record lows.
But the government already runs budget deficits even in times of economic recovery, and an ageing population means costs will rise in future.
Being outside the euro zone, the country faces no penalties for potential breaches of the compact, which the centre-left Czech government approved last year.
The "debt brake" would force the state to save money when national debt hits 55 percent of gross domestic product.
The bill says that once this level is reached, the following budget and budget outlook must be proposed with a view to reaching "long-term sustainable public finances".
The draft does not stipulate specific savings targets or acceptable deficit levels after the limit is breached. Instead it states that should the debt continue to climb and rise above 60 percent of GDP, the cabinet must propose measures to cut it.
Regional and municipal administrations would also have to keep debt under limits relative to their income.
No details of the debate in cabinet were immediately available. Prime Minister Bohuslav Sobotka was due to hold a news conference around 4 p.m. (1500 GMT).
The previous centre-right cabinet also proposed a debt brake but at lower levels. The centre-right parties now in opposition have not said if they will support the draft, which requires a three-fifths majority in parliament to become law.
The 2015 central state budget was approved with a 100 billion crown (2.6 billion pounds) deficit, but the nominal gross debt level is expected to stay flat thanks to drawing of reserve funds.
($1 = 24.2170 Czech crowns)