KIEV, March 1 ??“ The government on Thursday approved 2007 budget amendments seeking to increase minimum wages and pensions, but the move may also widen this year??™s budget deficit to a dangerous level, officials said.

The amendments call for a faster increase in wages and pensions then has been earlier expected and come amid persistent speculations that early election is likely in Ukraine later this year.

Any increase in social spending may somewhat boost popularity of the pro-government parties ahead of the election, analysts said.

The amendments will probably require 7.2 billion hryvnias in extra spending in 2007, First Deputy Prime Minister Mykola Azarov said. Most of the money will come from greater tax revenue, but at least 2.7 billion hryvnias will probably go towards increasing the budget deficit, Azarov said.

Azarov said the budget deficit would widen to about 18.4 billion hyvrnias, or 2.67% of the GDP, which, he said, would only slightly be wider than 2.6% deficit approved for 2007.

But Arseniy Yatseniuk, a deputy chief of staff at the presidential office and a former economy minister, said the plan may actually boost the budget deficit to more than 3% of the GDP, a dangerous level that may shake financial stability.

Yatseniuk said the extra spending may be financed at the expense of internal resources within the budget, while budget deficit must be left unchanged in order to ensure macroeconomic stability.

???There is one extremely serious thing that we have to discuss with the government in the nearest future,??? Yatseniuk said. ???It??™s the government??™s plan to increase social spending at the expense of widening of the budget deficit.???

???We??™re passing the level of 3% [of GDP], which is not acceptable,??? Yatseniuk said.

The government has to try to incorporate the remarks from the presidential office into the amendments or face a chance that the president would veto the bill.

???We still have enough time to make sure that a balanced bill is submitted to Parliament,??? Yatseniuk said.

President Viktor Yushchenko has been putting pressure on the government to increase the social spending this year, but the government??™s amendments apparently call for even faster increases.

The amendments call for the minimum wage to increase to 420 hryvnias per month from 400 hryvnias starting April 1, to 440 hryvnias from July 1 and to 460 hryvnias from October 1, according to the government.

The 2007 budget currently calls for increasing the minimum wage to 420 hryvnias from April 1 and to 450 hryvnias from Dec. 1.

The Regions Party, the largest group in Parliament, has recently suggested a controversial plan of holding early presidential and parliamentary elections on Sept. 30. The plan was rejected by Yushchenko as ???blackmail.???

The wider budget deficit may increase inflation in 2007 by putting upward pressure on prices, according to the Yushchenko office.

This is the second time the presidential office clashed with the government over the economic policy after Azarov has warned Wednesday that Yushchenko??™s comments may trigger panic and boost inflation.

???We set the target of 7.5% inflation [in 2007],??? Azarov said. ???The president makes a statement that it??™s impossible to hold inflation at this level. Such a signal from the president is a destabilization of financial situation in the country.??? (tl/ez)