Czech coalition seeks to ride out Stork's Nest storm

Czech coalition seeks to ride out Stork's Nest storm
The Stork’s Nest, a resort now under the wing of the billionaire's Agrofert conglomerate.
By bne IntelliNews March 24, 2016

The Czech coalition appears to have ridden out the immediate storm threatening it with collapse at a special parliamentary session on March 23. The hearing was called to probe claims that Andrej Babis, finance minister and leader of the junior partner Ano party, committed fraud in claiming EU funds.

Babis finally broke his silence at the session on the ownership of the Stork’s Nest, a resort now under the wing of the billionaire's Agrofert conglomerate. However, questions remain as to whether the project illegally received CZK50mn (€1.85mn) in development financing earmarked for small and medium-sized enterprises (SME). The EU anti-fraud office announced an official probe into the case on March 2

At the same time, it remains far from clear whether Babis will remain in the cabinet longer term. Pressure from the opposition, and more acutely the coalition-leading Social Democrat Party (CSSD), has raised the very real risk of collapsing the government.

Officials from Babis' Ano party have made just that threat in recent days. However, Babis stressed at the session that he will soldier on. "There is no reason for our coalition government not to continue," the finance minister said, according to CTK, although he was careful to add that this depends on his coalition partners.

While Prime Minister Bohuslav Sobotka steered clear of upping the ante during the hearing, a 'conflict of interest' bill targeting Babis remains on the table, as the CSSD and Ano continue tussling for leverage in a marriage neither can realistically leave due to a lack of clear advantage in polls.

The CSSD has been pushing to make Babis' alleged conflicts of interest whilst overseeing hundreds of millions of euro in EU subsidies an overriding issue. However, unable to rustle up the support to ensure a win in any new election, Sobotka pulled his punches during the session, as he has been in recent weeks.

The PM satisfied himself with reiterating that an investigation into the Stork's Nest drama by Brussels and the Czech police must be allowed to run their course. "The speech we heard here did not change my opinion on the matter. It is not possible, that I - as prime minister - substitute for an investigator or a judge," Sobotka said.

Keep it in the family

Over the course of a 90-minute address to MPs, the Czech finance minister - who in recent weeks has refused to discuss who owned the Stork's Nest when the application for the SME funding was made - explained that it was in fact held by his adult children and the brother of his partner. That contradicts reports that the nominal owner during the project's brief sojourn from the Agrofert stable was the in-house lawyer at the agricultural and chemicals giant. 

"I could not tell you the truth [earlier]. Every parent will understand why. Children are the most precious thing we have," Babis said, whilst also steadfastly refusing to step down. "I'm convinced that the ownership of the Stork's Nest farm had no impact on obtaining grants. I had no reason to hide anything. The grants were given according to the rules."

Instead, Babis used his emotional speech to assert that the controversy over the EU funds and juggled ownership of the project stems from a massive campaign with a single objective: "That I leave the government and Czech politics entirely".

Brussels will now have a big say on whether or not Babis has a long term political career. Until recently, the billionaire was viewed as the heir apparent for the PM's seat. The European Anti-Fraud Office (OLAF), is now investigating potential corruption and conflicts of interest on the part of Agrofert. OLAF's probe could also involve accusations the company used "hidden lobbying" to have Czech rules for EU bio-fuels subsidies changed.

According to an OLAF spokesman, investigations took an average of 21 months in 2014, although that performance has since improved. The next scheduled Czech election is in 19 months in October 2017.

'Lex Babis'

However, that won't stop the opposition, and the CSSD, seeking to press home their advantage. MPs from the right-wing Top 09, Civic Democrats (ODS) and Dawn party, who initiated the special session, appeared less interested in hearing Babis’ explanation of the ownership of Stork's Nest than it was in using the special session to attack Sobotka for keeping him on as finance minister, Hospodarske noviny reports.

What concerns the opposition is the fact that Babis, who has clear conflicts of interest, is overseeing EU subsidies, Top 09 leader Miroslav Kalousek told HN, – which is owned by another billionaire, former New World Resources coal baron Zdenek Bakala. However, the centre-right opposition is also concerned by clawing its way back to relevance, and has been coniving with the CSSD. 

The CSSD’s recent move to tighten the conflict-of-interest rules regarding  ministers' ownership of commercial assets has even raised speculation that the left-leaning coalition leader could try to eject Ano from government and cobble together a pact with the fragmented minor parties on the right. In response to the bill on conflicts of interest, Ano insists the same rules must apply for all politicians at all levels.

If that doesn't happen, the CSSD might as well have written a law that says, “Babis cannot be in Czech politics”, the billionaire finance minister said on March 17.

Indeed, much of the Czech press has taken to calling the CSSD’s proposed amendment to the conflict-of-interest law – which would also prevent cabinet ministers from owning any stake in a company operating a radio station, a television station or a newspaper (but not the internet) – as “Lex Babis”.

The billionaire bought the Mafra Media Group, publisher of Mlada fronta Dnes and Lidove noviny in 2013. He later expanded his media empire by purchasing the leading commercial radio station Impuls.

Summoned to Prague Castle last week, Babis insisted after meeting President Milos Zeman that he has no reason to resign. MfD writes that Babis will remain finance minister as long as the police or OLAF do not declare that fraud was committed.

But LN noted recently that Babis has sent his coalition partners a clear message: vote for the CSSD conflict-of-interest proposal and Ano will leave the coalition.