Instead of putting an end to a political stalemate that has crippled policy making since June, the Czech general elections on Oct 25-26 produced a fragmented parliament as none of the seven parties that made it to the lower house garnered a majority raising the prospect of lengthy negotiation to form a coalition government.

The centre-left Social Democrats (CSSD) came first winning 20.45% of the votes, a far slimmer victory than expected, the statistics office said. Second ranked newcomer centrist Action of Dissatisfied Citizens (ANO) of billionaire businessman Andrej Babis that was supported by 18.65% of the Czechs. The far-left Communist Party of Bohemia and Moravia (KSCM) followed with a backing of 14.9% ahead of the former ruling centre-right parties TOP 09 and Civic Democrats (ODS) with 11.99% and 7.72%, respectively. The other two parties that passed the 5% threshold to enter the parliament are Christian Democrats (KDU-CSL) winning 6.78% and the Dawn of Direct Democracy (Usvit) of Czech-Japanese entrepreneur and senator Tomio Okamura with 6.88%.

CSSD’s weak election result was cited as a reason by the party’s leadership body to vote 20-13 to ask chairman and candidate for prime minister Bohuslav Sobotka to step down, CTK news agency reported on Oct 27. But since the vote is not binding, Sobotka refused to resign saying that rivals led by the party’s deputy head chairman Michal Hasek, would be under the influence of President Milos Zeman. Sobotka is a longtime rival of Zeman, who is also a former Social Democrat prime minister. Under the Czech Constitution, Zeman has the right to appoint the prime minister and he has indicated that he favours Hasek to be the country’s next premier.

CSSD’s leaderhip body also voted to exclude Sobotka from the team that will hold talks with other parliamentary parties to form a coalition government. 

CSSD wants to launch talks with ANO and KDU-CSL on setting up a three-party coalition government. The three parties will control 111 mandates in the 200-seat lower house. Forming a government with ANO would not be easy for CSSD without giving up some of its election promises. CSSD has pledged to raise taxes for big companies and high earners, while pro-business ANO is against tax hikes. Babis has been sending mixed signals and is yet to be seen whether he will support a CSSD-led government or stay in opposition.

The early general elections were called several months ahead of a regular vote in May 2014 after the former centre-right government collapsed in June 2013 amid a bribery and spying scandal.

The market has so far ignored the political instability as it got used to frequent cabinet reshuffles, as seven governments had come and gone over the past decade. But protracted post-election negotiations and uncertainty about future government policies will delay measures needed to revive the economy, cast doubt over next year’s budget and could eventually deter foreign investors who value the country's relative stability.