Tim Gosling in Prague -

The Czech interim government installed by the president in July lost a vote of confidence on August 7, as widely predicted. Having secured a "respectable" loss, President Zeman will continue to push the boundaries of the constitution to keep interim Prime Minister Jiri Rusnok at the helm, while snap elections later this year now look more likely.

The government had zero party support when it was initially appointed last month, but Zeman has used his influence within the country's left-leaning parties over recent weeks to rally 93 votes in the 200-seat parliament. With seven lawmakers absent, the final tally against was a straight 100.

Having failed to win the support of a simple majority, Rusnok will now have to resign. However, he will stay on in a caretaker capacity until a new government is formed. As head of state, Zeman has the sole right to pick the next prime minister, but he's in no rush to do so as he manipulates a weak constitution to keep his man in power.

The failure of the Zeman-appointed administration to pass the vote was almost predestined, given that the president put it in place in the face of opposition from political parties of all stripes. However, as ever, the wily president has performed a sleight of hand - even if in somewhat plain sight - having spent the last few weeks horse-trading behind the scenes in order to secure at least a respectable loss.

Zeman has made much of his election in January in the Czech Republic's first ever direct vote for the presidency, claiming it hands him a mandate to direct government affairs hands on. The idea appears to be that a close call in the confidence vote allows him to claim the same again, and thus override the parliamentary vote, leveraging the widespread anger in the country over corruption amongst the parties to help him.

Staying put

With a reasonable performance in the confidence vote now in the bag, Zeman is likely to leverage the vague wording of the constitution to stall on replacing the cabinet. There is no deadline for the president to put forward his second (and final) proposed cabinet following a government collapse, and also nothing to prevent him simply appointing Rusnok again.

Both the PM and president have hinted that Rusnok could govern the country until the May 2014 general elections without parliament's consent. Zeman told the lower house just ahead of the vote that he would not appoint a new prime minister for at least several weeks should the outcome be negative, insisting the police investigations into political corruption which contributed to the fall of the previous centre-right administration of prime minister Petr Necas should be concluded first.

"I have been assured this investigation will be concluded in several weeks and, I can assure you, even if you put me on the rack, I will not make a second attempt (to form a cabinet) during those several weeks," he told parliament, according to Reuters.

The real coup in the confidence vote was pinning down the Social Democrat Party (CSSD), which Zeman formerly led before falling out with the current leadership in 2005. With a startling lack of enthusiasm, CSSD leader Bohuslav Sobotka declared on August 6 that his party had agreed at a "stormy and dramatic" leadership summit to support Rusnok's cabinet.

Insisting that the move was made to avoid splitting the party, Sobotka claimed support for the administration is the shortest route to early elections. The communist KCSM made a similar claim. With Subotka's party well ahead in the polls, the CSSD has been pushing for a snap vote since the previous Civic Democrat (ODS)/Top09 coalition was ousted in early June over to a spying and corruption scandal.

However, those centre-right coalition partners - the ODS in particular - have insisted since that they have the support in parliament to form another government and see out their term. However, in the end the centre-right camp only managed 100 votes in Wednesday's vote, so based on that they too look short of the majority 101 of parliamentary votes required if they were to try to form a new government.

Zeman now appears to have succeeded in splitting the partnership. Following the vote, Top09 called for a special parliamentary session to discuss the prospect of early elections. ""The Top09 caucus has decided to back an early election," the party's parliamentary faction head Petr Gazdik said just after the result of the confidence vote was announced, reports AFP.

However, it's unclear which way ODS will bend. Under the constitution, Zeman can name one more cabinet. Should that fail also to win support in the lower house, the speaker has the third and final stab at nominating a government. Current speaker Miroslava Nemcova is the ODS candidate for PM.

More horse trading

More horse trading now appears to be on the cards. Sobotka told CTK that he may try to persuade both Zeman and the coalition to allow the CSSD to form a minority administration. He also said that he will seek to negotiate a snap election with other parties.

A constitutional majority of 120 is needed to break Zeman's grip on parliament by heading to the ballot boxes this year. The president is clearly betting that the fierce major party opponents on the left and right of the spectrum will not be able to thrash out a deal.

Meanwhile, even before the confidence vote the parties had accepted that Zeman and Rusnok had no intention of respecting the traditional processes. Parliament is already attempting to limit the government's power by preparing a constitutional bill that would only allow the cabinet to replace personnel in state-run companies if it wins the confidence of the house. Rusnok's government has launched an extensive purge of staff in public institutions and companies.

There are also moves afoot to try head off Zeman's clear attempts to push the boundaries of his office. Since he moved into Prague Castle in March, analysts have been debating his efforts to move the country towards a semi-presidential political system.

The CSSD says it wants to talk with the other parties about changes to the constitution that would specify more precisely the powers of individual constitutional institutions with the aim of preserving the parliamentary system in the country. It also wants to tighten up the constitution to set deadlines for the president by which to appoint governments and also to introduce co-responsibility of other constitutional institutions for the appointment of members of the central bank's banking council, among others.

Another major issue at play in the stand-off is the €8bn-12bn tender for the expansion of the Temelin nuclear power plant. While state-controlled utility CEZ said late last month that it would delay the deadline to close the competition by a year to September 2014, it's perfectly possible that Zeman and Rusnok could push through decisions on the controversial project.

The contract is seen as a crucial test of the Czech Republic's geo-political leanings, with US Westinghouse vying against Russian state nuclear agency Rosatom for the job. Zeman has long been said to have close ties to Russian business, while Rusnok and other ministers said recently that the supervisory boards of state companies including CEZ could be changed.

Despite the mess, as ever investors remain largely unconcerned about political risk, nor about the possibility of a left-leaning government taking office, be it this year or next. While Citigroup analysts point out that "the actual economics-related problem is the approval for the 2014 state budget, which has to be sent to the lower house in the beginning of September," the previous government's tight fiscal management saw yields descend to record lows. And while both Rusnok and Sobotka have promised to loosen the purse strings, in reality there's little room for manoevre. As Citigroup puts it, "[W]e do not expect a material quantitative change in fiscal policy as it has already been proposed that the fiscal deficits remain close to 3% of GDP by the previous Necas government."