Czech PM-designate expects new government to be appointed by President on July 10.

By bne IntelliNews July 3, 2013

The new Czech government will be appointed by President Milos Zeman on July 10, PM-designate Jiri Rusnok was cited as saying by CTK news agency.

Zeman appointed on June 25 Rusnok to form an interim cabinet to replace the centre-right coalition government of Petr Necas who resigned last month in the wake of a bribery and spying scandal.

Rusnok, a former finance minister and economic adviser to Zeman, said he has so far chose eight ministers and is yet to find six more including a head for the finance ministry. The forming of the new government is causing tension among the leftish opposition Social Democrats (CSSD), Zeman’s former party, as Rusnok has selected several ministers from the party. CSSD is against Rusnok’s government as the party wants to dissolve the parliament and call early elections it hopes it will win as a clear leader in opinion polls.

Rusnok government will have to win a vote of confidence in parliament to rule until scheduled general elections in May 2014 but no party has so far announced it will support it. And while CSSD wants early elections, the outgoing centre-right coalition comprising Necas’ Civic Democrats (ODS), TOP 09 and LIDEM insist Zeman appoint their candidate as next PM, parliament speaker Miroslava Nemcova, claiming they have the needed 101 votes in the 200-seat parliament to back the cabinet.

If Rusnok government fails in winning the confidence vote, due to be held within a month after the cabinet appointment, it will stay on as a caretaker cabinet until Zeman names a replacement or early elections are held. Zeman has no constitutional deadline to appoint another PM. Early elections can be called if 120 out of the 200 lawmakers in the parliament’s lower house vote to dissolve the parliament and thus provoke a snap ballot.

One of the main tasks of the new cabinet is to draft next year’s budget. Rusnok has said he will try to keep the target of the outgoing cabinet to maintain the budget deficit below EU’s limit of 3% of economic output in 2014 but hinted that this year’s budget gap target of CZK 100bn might be exceeded in order to support the ailing economy that has been contracting for six straight quarters till March 2013, the longest on record.

The appointment of a caretaker cabinet is not expected to have a major effect on the market that is used to frequent cabinet reshuffles as in the past decade it saw seven governments come and go. But analysts predict that it may lead to delay in a USD 10bn project for the expansion of Temelin nuclear plant operated by state-owned power group CEZ. The company wants to select a supplier for two more reactors at Temelin by September 2013. Rusnok has said his government will lack the mandate to decide on the tender.

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