Public finance reform — including a major overhaul of the pension system, tax reform and trimming excessive state budget expenditures — will be at the top of the Cabinet's agenda.

Specifically, the government plans to pursue canceling taxes on dividends and capital gains, as well as inheritance and gift taxes and the property transfer tax. The government will also propose killing a law requiring businesses to have monitored cash registers, a hot button issue in the run-up to elections last summer.

The Cabinet plans to reduce the share of mandatory expenditures on the overall state budget from its current 70 percent to below 50 percent by 2010. It also hopes to slash the share of the state budget deficit on the gross domestic product from about 4 percent at the end of 2007 to 3 percent in 2008.

Major privatization will also be front and center. The Cabinet will prepare and possibly carry out the sale of national air carrier Czech Airlines and the Letiště Praha airport this year. Privatization of railway operator Czech Railways should follow in 2008, and privatization of Czech Post will be considered.

The privatization of power company ČEZ will aim to create a diversified electricity market with regular competition in the Czech Republic.

To appease the Green Party, the new government also vowed to keep the limits on brown-coal mining and to not plan construction of any new nuclear power plants.

The Cabinet should focus above all on efficient spending; otherwise its plans for tax cuts will fail and higher taxes will be needed, Raiffeisenbank analyst Aleš Michl said.

But some campaign promises seem beyond saving.

To persuade the two Social Democratic defectors — Miloš Melčák and Michal Pohanka — to support the right-of-center Cabinet, the Civic Democratic Party promised to introduce tax cuts for all people. However, the planned 17 percent to 19 percent flat tax would increase taxes on people in the lowest tax bracket.

"It will require some creativity in interpretation to meet the obligation," HVB chief economist Pavel Sobíšek said.

The Cabinet's weak support in the Parliament also makes it unlikely that the flat tax will be put in effect anytime soon.

"The government obviously does not have much chance of pushing through its program," Sobíšek said.