Tension within Czech ruling coalition mounts as PM squabbles with FinMin over aid to hospitals, OKD.

By bne IntelliNews April 7, 2014

Tension within the Czech three-party ruling coalition is mounting as Prime Minister Bohuslav Sobotka is squabbling with finance minister Andrej Babis over state’s aid to hospitals and struggling miner OKD.

Sobotka, who is also the leader of the senior ruling CSSD, wants the government to provide financial aid of CZK 1.1bn (EUR 40mn) to NWR’s unit OKD to keep its Paskov hard coal mine open until 2016 instead of letting it close at the end of 2014 as planned by the owner, CTK news agency reported. Babis, however, is opposed to extending state aid to the mine insisting that the government should not get involved and “leave it to market forces”.

NWR said in September it will shut down the loss-making mine by end-2014 cutting more than 2,000 jobs unless it gets some sort of aid from the government and keep the mine open for two more years. The government fears that some 6,000 more people might lose their jobs due to know-on effects in a region already suffering from high unemployment.

Babis is also against CSSD’s plan to raise payments to hospitals by CZK 2.1bn to compensate for a decision to abolish medical fees.

Tension between Sobotka and Babis started rising two weeks ago when the PM suggested Babis should sell his Agrofert business to avoid questions about conflict of interest. Babis, the Czech Republic’s second richest man with a fortune estimated at about USD 2bn by Forbes, owns Agrofert whose assets span from chemicals, farming and food procession to the media sector. 

Sobotka also accused Babis of using the media he owns to raise pressure on CSSD referring to a publication in Babis-owned Mlada fronta Dnes daily about the disadvantageous privatisation of OKD. Sobotka was finance minister in 2004 when the OKD was privatised. The April 3 report by Mlada fronta Dnes (MfD) said that the European Commission started to look into OKD privatisation on suspicion of a too low selling price.

The bickering between the leaders of the two main ruling parties comes days before the coalition parties start talks on the 2015 draft budget. Sobotka and Babis still disagree on how to finance increased spending on welfare and infrastructure. The finance minister has opposed plans by CSSD to hike corporate taxes insisting instead that the government should find savings in state operations.

Most recent polls show Babis’ ANO as the most popular Czech party and Babis, himself, as the most trusted politician. 

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