VISEGRAD: Crisis? What crisis?

By bne IntelliNews April 15, 2011

bne -

There's an excruciating YouTube video that's gone viral showing Czech President Vaclav Klaus surreptitiously putting a ceremonial pen in his pocket while his Chilean counterpart, seated next to him, is talking. What makes it so funny, says Erik Best, a particularly spiky commentator on Czech affairs, is that, "it shows a man with everything, pilfering something that he doesn't need, and that is his for the taking anyway. It's sad when duplicity, whether in politics or business, is the default option."

What is less amusing, though, is that treachery and deceit are indeed the default option in today's Czech politics, as evidenced by the past few weeks of political shenanigans that have involved secret recordings of ministers, allegations of a putsch by a coalition party, whispers of homosexual affairs, ministerial resignations and, of course, charges of bribery.

Events came to a head on April 14 when the pen-pilfering president hastily convened a meeting of coalition party leaders, saying that a secret recording of a former coalition parliamentary deputy accusing the senior coalition party, the Civic Democrats (ODS), of a government putsch was the "last straw."

The outcome of that meeting was a pledge by the three parties in the coalition, the ODS, Top09 and Public Affairs (VV), to maintain the alliance, but that further talks would be needed to iron out difficulties. A cabinet reshuffle is certain, perhaps followed by a parliamentary confidence vote. "I was assured by all three chairmen of the coalition parties that they are firmly determined to continue on the basis of the three-party coalition and that they know well that each of them must back off a little," Klaus told reporters.

For the outsider, the whole affair with all its allegations, counter-allegations, intrigue and skulduggery is confusing, but analysts say the root of the problem is that the gravy train on which so many of the Czech Republic's politicians and businessmen have been happily riding for so long is slowly being derailed, and this is leading to an internecine fight within the ODS party which, like the vortex created by a toilet being flushed, has been sucking down anything that's stuck to the side of the bowl.

A monument to inefficiency

Few doubt that the Czech Republic is becoming more corrupt. The anti-graft NGO Transparency International (TI) puts the Czech Republic at 53rd place out of 178 in its 2010 Corruption Perceptions Index, 12 places down from its ranking in the 2007 survey. In the European sub-ranking, the Czechs are at a miserable 24th place out of 30.

Even the former prime minister Mirek Topolanek spoke in 2010 about the need to bring the 15-20% "commissions" down to the old level of 5-7%. However, one prominent property developer in Prague told bne last year that it's not necessarily that the bribes are getting bigger, but that the number of people needing to be paid off is getting larger.

The worsening situation has prompted some foreign investors to speak out; the head of the American Chamber of Commerce, Weston Stacey, said in an interview with the newspaper Lidovy noviny published April 11 that foreign investors are being scared away from the Czech Republic due to its corrupt image and political instability. "During the crisis, the flow of investment almost halted and now it is being discouraged by the unstable political situation and corruption," Stacey told the paper. "Every investor who wants to do business in the Czech Republic first of all asks if corruption is as bad as it is said to be."

Two days later it emerged that ENIC Group, a British investment which controls the English Premier League club Tottenham Hotspur Football Club, has decided to pursue an outstanding CZK110m (€4.5m) claim against the top-flight Czech side SK Slavia that it bought back in 1997, even though it might push that club into relegation. ENIC director Matthew Collecott told Czech Position that there's no question of ENIC deferring its debt settlement demand, given the fact that the group maintains it was ousted from the board and ownership of the club through an alleged scam by the current administrators and owners. The board of Slavia did not return calls to bne.

This same week it also emerged that the Czech Ministry of Defence, a notorious nest of corruption over the years, ended up ordering 112 Iveco armoured vehicles at a cost of over CZK4bn when the Czech Army had requested just 19 vehicles for use in Afghanistan.

The constant drip-drip and occasional splash of corruption is having a corrosive effect on Czech democracy. A poll taken even before the recent brouhaha found that some 86% of the public show some degree of scepticism about their leaders' motives for seeking public office, with the most popular reason for someone becoming involved in politics reckoned to be to increase personal wealth or power.

So will the coalition be able to draw a line under the recent problems and start restoring trust in the political system? Not likely, say analysts, not least because the recent "crisis" was engineered by the "Prague" faction of the ODS for the precise reason of regaining power in order to perpetuate the environment that allows corrupt practices to flourish. And while they may have been stymied for now, it won't be long before another attempt is made.

Mr not-too shabby

In May 2010, the Czech public, dispirited by the global economic crisis, finally tired of the established parties and voted in significant numbers for two new parties, Top09 and VV, giving them 43 and 24 seats respectively. Together with ODS' 51 seats, the new three-party coalition commanded a decent majority of 118 seats in the 200-seat parliament, giving hope it would be able to push through the kind of bold reforms that the country has lacked since the 1990s.

In keeping with the new climate of openness and honesty, the prime ministerial post was given to Petr Necas, a used Skoda-driving, highly-principled politician, whose appointment as head of the ODS was taken as a sign the party at large wanted to purge its ranks of the most corrupt elements.

And indeed, there were tiny, but tangible, signs that things might be improving. Just recently, on April 13, the government announced the Czech Republic would not be able to draw money from the EU's Environment Operation Programme due to the suspected corruption at the State Environmental Fund (SFZP) that forced Pavel Drobil to resign as environment minister in December.

Then the office of Necas posted on its website a report by the global infrastructure player Mott MacDonald detailing the failings of the Czech Republic's construction industry and its regulatory oversight. Mott MacDonald is famous for a report a few years ago that arrived at the startling conclusion that 1 kilomtere of normal Czech motorway costs around CZK500m (€20.6m) to build, whereas 1 km of German or British motorway costs almost half that at CZK280m.

Necas has also been successful so far in delaying a long-mooted €4bn-plus tender for a nationwide environmental clean-up, which critics argue will be one of the biggest frauds perpetuated on a Czech populace that has suffered a long line of them.

Inevitably, though, when people find their "payments" are drying up, they fight back. And so began an engineered crisis that sought to back Necas into a corner and destabilise the coalition. Transport Minister Vit Barta, an unattractive politician whose security firm he set up has been linked to several scandals in the past, found himself being accused of making payments to members of his own VV party. Necas, egged on by the "Prague ODS" wing of the party, called for Barta and two other VV ministers to be fired, only for Klaus to demur, other coalition members to start demanding the resignations of each other - and chaos ensued.

Barta has since resigned, though Necas hasn't been dislodged. And while Necas' two archrivals, former PM Topolanek and Finance Minister Miroslav Kalousek of TOP09, have been protesting (perhaps a little too much) that there's been no plot against him, the PM's position remains precarious and few believe he can last the full term of office that ends in 2014. A new PM more amenable to maintaining the track that the gravy train runs on is expected.

To uncover who is behind any plot, it's usually a simple case of following the money. Or in the Czech Republic's case, follow the pen.

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