Czech government faces challenges as it takes office

By bne IntelliNews July 11, 2013

bne -

The Czech cabinet found itself embroiled in suspicions of corruption even before it managed to take office on July 10, as the new finance minister was forced to refute suggestions he may have promised favours in return for help paying off debts. The same man is preparing a budget that has no chance of being implemented.

An unsuccessful candidate in the country's presidential election in January, Jan Fischer was appointed finance minister in the new interim cabinet under Jiri Rusnok on July 8. The new prime minister was chosen to lead a "government of experts" by the eventual winner of the presidential election, Milos Zeman.

That move followed the June collapse of the former centre right coalition under former PM Petr Necas, in the wake of a series of anti-corruption raids which implicated a close aide. The coalition parties, as well as the opposition CSSD - a shoe in to win the next elections - are set to hand the Rusnok cabinet a defeat in the necessary vote of confidence in parliament.

That looks likely to paralyze the Czech political system, with the power hungry Zeman capable under the constitution of keeping his man Rusnok in office regardless until the next scheduled election in May. That puts construction of the 2014 budget at risk, threatening to stall investment just as the country should be pushing its way out of recession.

While the CSSD insists early elections should be held, coalition parties ODS and Top 09 claim to have a parliamentary majority to allow them to form a government to see out the term. They have pledged to block Rusnok's proposals for fiscal stimulus including infrastructure spending.

As finance minister, Fischer - who switched his support to Zeman when he pulled out of the presidential race - has suggested his budget would loosen the purse strings significantly. The coalition has lost huge support amongst the population over the past three years due to an extremely harsh austerity programme. Albeit, Czech borrowing costs benefitted, many analysts agree that the policy has helped push the country into its longest ever recession.

"We both agreed that this country needs to revive economic growth and fiscal policy should help to do so," Fischer told reporters July 8, according to Bloomberg. "Restrictions and cuts need to be done for sure, but returning to growth is a priority."

Should the interim cabinet's fiscal plan be rejected as expected, "then the 2014 budget will need to follow this year's," points out Martin Lobotka at Erste. "This can actually be a good thing," he suggests, "in that the government will not be able to go on a spending spree in an election year, should it so desire." However, that would also see the country stuck without the chance to relax austerity - a move that even the hawkish coalition had planned before it fell.

Suspicious minds?

However, on top of the fact that his fiscal plan looks to have zero chance of being implemented, the uncharismatic Fischer saw his prospects in his new role sink further the following day, when he was forced before even taking office to deny a conflict of interest. On July 9, he insisted in a press release that he has not "sold" favours.

Less than a week before taking office, Fischer was reported to be still struggling to pay off debts incurred during his failed presidential campaign. However, according to CTK, over the preceding six days, over CZK5.3m (€204,612) arrived at Fischer's presidential campaign account, allowing him to clear the books.

That fulfilled an earlier promise to wipe out the debt before starting his new job. Fischer was the only one of nine presidential candidates to miss the legal deadline to clear campaign debt, and clearly needed to avoid suspicion that creditors might hold sway over his decisions. However, some see the risk as simply having shifted.

"My acquisition of the last gifts had been agreed upon long before I was offered the post of finance minister and even long before the present cabinet fell," Fischer insisted in his statement. "Since my sponsors are generally well known, it is absolutely ruled out that they may enjoy some advantages or that I may favour them as finance minister." He added that he has not promised any help to sponsors in exchange for their gifts.

Fischer's sponsors are declared as lawyer Daniel Palko, businessmen Ladislav Drab and Stefan Havlik, and David Sivor - a member of the Czech-Israeli Mutual Chamber of Commerce.

On July 10, two criminal complaints were launched against Fischer. The Salamoun Association - a Czech NGO - said it has "called on Prague state attorney Jana Hercegova to look into the suspicion that the donation of CZK5.3m ... can be qualified as the provision and acceptance of a bribe."

Meanwhile, journalist Jiri X. Dolezal filed a criminal complaint with Olomouc High State Attorney Ivo Istvan - the man who lead the raids that brought down Necas' government. He accused the new finance minister of "buying" his job when he switched his support to Zeman in the presidential race.

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