Nicholas Watson in Prague -

Popping up all over Prague in August have been billboards showing a right-wing politician's hand passing over a big bag of money to a hand in an unmistakably priestly pose and sleeved in a Catholic vestment. This is a graphic illustration of how the issue of whether the Czech state should return property seized by the Communists to the churches will be one of the defining campaign issues for this autumn's elections.

The billboards are the work of the opposition Social Democrats (CSSD), who are bitterly fighting a bill being pushed through parliament by the centre-right Czech government to give back property and provide compensation worth a total of CZK134bn (about €5.4bn) to the country's churches, over half of that to the Roman Catholic Church. The amount is made up of CZK75bn worth of buildings, land and forests that can proven to have been owned in February 1948, and CZK59bn in financial compensation over the next 30 years for property that can't be returned.

CSSD also plans to distribute flyers to Czech households in the run-up to the elections for the upper house in the form of a postal money order made out to the sum that the return of the churches' property would cost each of the 10.5m population, CZK12,755.

Such figures tap into a rich vein of resentment among the largely secular population, who are struggling under this coalition's austerity measures to right the country's finances. A variety of polls show that up to 70% of Czechs are against the bill.

The Catholic Church concedes that the timing is not ideal. "We totally understand that it is a difficult time for all citizens," says Monika Vyvodova, spokesperson of the Czech Bishops' Conference, a grouping of bishops in the Czech Republic.

Yet Vyvodova goes onto explain what many supporters of the bill say, that the issue is not, as CSSD claims, simply one of handing over a "gift" to the churches (the language in the poster uses the Czech word "darovat", which means "give" but usually in the sense of a birthday present). Rather, it is actually part a financing model designed to eliminate the national financing for churches by 2030, which currently amounts to around CZK1.4bn a year. "The annual range of compensation will be CZK2bn-3bn per year, depending on inflation, which is slightly more than what the state pays the churches now in accordance with the law adopted by the Communists. Although the state will initially pay both amounts, they will gradually decline to zero," says Vyvodova.

A road that leads to the tidying up one of the last remaining issues left over from the country's communist past is tempting for many, as the settling of disputes will open up land for building on. This is one of two big remaining cases of restitution yet to be dealt with by the post-communist Czech state. The other is a squabble within the Schwarzenberg family, whose principal heir, Karel Schwarzenberg, is the current foreign minister. Elisabeth Pezold, daughter of Prince Adolf Schwarzenberg - whose vast property holdings, including the chateaux of Hluboka and Cesky Krumlov, were confiscated first by the Nazis and then the Czechoslovak state - claims her adopted brother Karel is blocking her attempts to inherit the property. On that issue, Elisabeth Pezold's son Adam says: "I feel we're making progress to an extent, but the legal process here robs you of any belief in the judicial system."

Vladimir Dlouhy, a former economy minister and a candidate in next year's presidential election, says the coalition's church restitution bill is, in general, a step in the right direction. "22 years after the end of Communism, we should be able to sort out this issue," he says. "But as is usual in politics the devil is in the detail, and both government and churches should be better able to explain several sensitive issues."

Certainly, the debates within the parliament have been acrimonious, with CSSD deputy chairman Lubomir Zaoralek claiming the role of the Catholic Church is unclear during World War II, prompting the Catholic Church to respond that the left-wing opposition's anti-Semitic and anti-clerical stance is reminiscent of propaganda pumped out by the Third Reich and Communists. "The parliament has turned into a platform where churches and religious societies are blamed for various sinister motives and are suspected from dishonesty," church leaders harrumphed.

The church position wasn't helped by Priest Tomas Halik appearing on television and claiming that more money has been stolen by corrupt politicians and businessmen than what's been agreed in the restitution bill

It was no surprise, therefore, when the upper house, which is dominated by leftist parties, voted down the bill on August 15 and sent it back to the lower house, which had passed it on July 14. The three-party coalition government will need to muster a majority of 101 votes in the 200-seat lower house in September to overturn the Senate's veto, yet a series of defections and scandals has reduced its majority from 118 to nearer 100, meaning any new vote is too close to call.

Even if the bill does pass, it has to be signed by the outgoing and mercurial president, Vaclav Klaus, who has been supportive of church restitution in general, but whose view on this particular bill is unclear. One persuasive argument against the bill for many like Klaus is the worry that the bill could open up claims for restitution before 1948, which might include certain German religious orders that lost land as part of post-war agreements.

"All that came between that date [1948] and the end of communism in 1989 is fair game to be wiped from the law books, but no laws predating the Bolshevik takeover can be touched," says Ky Krauthamer, senior editor of the NGO Transitions Online.