German Chancellor Angela Merkel downplayed the Czech Republic's rejection of Europe's new fiscal treaty at a showdown with Czech leaders in Prague on Tuesday, despite the volley of criticism that the Eastern European country has faced since the move.

At a meeting with Prime Minister Petr Necas and President Vaclav Klaus, Merkel said the absence of the Czech Republic in the pact would not pose a threat to EU plans to rein in overspending. Merkel also insisted that Germany was not pressuring the Czechs to alter their perspective on the matter.

"Even if the Czech Republic has not yet signed the fiscal pact, we know that the Czech government is keeping the option open," Merkel said, adding, however, that it was "of the utmost importance" that Prague support the the pact's overall goals.

Prime Minister Necas said while his government may not have signed up for the pact, it would still meet its conditions.

"We are convinced that only a strengthening of competitiveness can solve the debt problems in the long term," Necas said.

A Czech rebellion

In January, the Czech Republic and Britain opted out of the fiscal deal adopted by the 25 other EU nations aimed restoring investor confidence in the wake of Europe's sovereign debt crisis.

The pact would impose sanctions on those who break deficit rules.

Within the three-party Czech coalition government, euroskeptics in Prime Minister Necas' Civic Democrat party as well as President Klaus resisted the pact.

That alienated their main conservative partner, TOP09, headed by Foreign Minister Karel Schwarzenberg. He warned Czechs not to move outside the European mainstream. Necas, himself, has left the door open to joining the pact later.

The Green Light to Nuclear Plans

Merkel also said at the Prague meeting that Germany respected Czech intentions to rely on nuclear energy in the future. The Czech Republic has announced its wish to construct two further reactors at the Temelin nuclear power station, close to the German and Austrian border.

The development comes despite German and Austrian concerns - Austria uses no nuclear energy and German plans to phase it out by 2022. The winning tender for the 20 billion euro Temelin project is due to be announced in 2013.

Germany's southern region of Bavaria and northern Austria lie respectively just 50 and 60 kilometers from Temelin, where dozens of malfunctions within its two existing communist-era reactors have made headlines in the past.

sej, ipj/acb (dapd, dpa, Reuters, AP, AFP)