Czechs set for early elections

By bne IntelliNews August 21, 2013

Nicholas Watson in Prague -

On August 20 a parliament that had begun three years ago with much fanfare about what the new Czech government with a solid majority could achieve, ended with a rare show of unity as it voted to dissolve itself, paving the way for early elections.

The proposal to dissolve parliament was tabled by the three main parties and was backed by 140 legislators in the 200-seat in the Chamber of Deputies, exceeding the necessary three-fifths majority. The vote ends weeks of political turmoil since former prime minister Petr Necas was forced to resign in June over a bribery and spying scandal, a situation that was exploited the new left-leaning president, Milo Zeman, to install his own "government of experts" - or to its critics, "government of cronies" - against the wishes of the parliament.

Inevitably that government, led by long-time Zeman ally Prime Minister Jiri Rusnok, lasted the less than five weeks it took for a confidence vote to be held, which it duly lost on August 16. Zeman has been trying to use the vaguely worded constitution to nevertheless keep the Rusnok government in power until the next scheduled elections in May 2014, but the August 20 vote has put paid to that.

Under the constitution, early elections now have to be held within 60 days of the president formally dissolving parliament. Zeman has indicated that he would like to see the nation go to the polls on October 25 and 26.

Sorry saga

The vote brings the curtain down on a particularly depressing period in Czech politics, even by the country's fairly low standards.

The tawdry end to this parliament stands in contrast to how it all began when Necas was sworn in as prime minister on June 28, 2010. Then, he headed a three-party centre-right coalition of his Civic Democrats, TOP 09 and Public Affairs, which holding an 18-seat majority in the lower house promised to push reforms that had been stalled for years by a succession of weak and minority governments.

Yet it didn't take long for the sleaze, corruption, money-grubbing and infighting to begin, leading to an endless series of confidence votes over the years, all defeated but with ever-decreasing certainty.

The most notable policy of the government over the years has been its austerity measures pushed through by the bibulous former finance minister, Miroslav Kalousek. His fiscal consolidation drive won international plaudits for bringing down the budget deficit through a series of deep spending cuts and tax hikes, moves that were rewarded by bond investors. In July, the rating agency Standard & Poor's promoted the country into its top 10 of the world's least risky issuers. However, it also led to the longest ever recession in the Czech Republic, with the country only crawling out of the slump in the second quarter when GDP managed to grow 0.7%.

Despite Zeman's best efforts to put off snap elections, he and the opposition Czech Social Democratic Party (CSSD) - the party he led as PM a decade ago, before falling out with many of the current leadership - should be the main beneficiaries.

CSSD is the overwhelming favourite to win the upcoming election after the implosion of the ODS. In an interview with Reuters on August 20, CSSD leader Bohuslav Sobotka said his party hoped to win the support of a third of all voters and then form a single-party government most likely supported by the Communist Party (KSCM). "It is definitely possible to expect negotiations with KSCM. It can be only KSCM or it can be more parties [that will support a minority government]," Sobotka was quoted as saying.

However, Sobotka stressed CSSD would not invite the Communists, who oppose Nato membership, to enter a coalition government with them. "We are proponents of European integration and we are proponents of our membership in the Nato. The Social Democrats do not intend to accommodate the program of the Communist party in any way," he told Reuters.

Whether Sobotka will be the new PM will depend much on Zeman, who dislikes him intensely and is pushing to rebuild influence within CSSD. The populist president - who, alongside predecessor Vaclav Klaus, has lurked over Czech politics for close to two decades - pledged to increase the powers of his office after he was swept into Prague Castle in the country's first ever direct presidential election in January.

He has spent the months since carrying out a campaign to do just that, hacking away at the vulnerable Necas government and, some suspect, even having a hand in the scandal that brought him down. With his "government of experts" now discarded, few doubt he will attempt to reassert his influence over CSSD, pushing Sobotka aside (perhaps making him finance minister) and then installing his own man at the top. The Czech Republic, argue some critics, is rapidly heading toward becoming a quasi-presidential political system with little or no constitutional debate.

In terms of polices, the centre-left CSSD will roll back the austerity measures and look to kick-start the economy by boosting spending on infrastructure and housing with the help of EU money. Nevertheless, Sobotka has pledged to keep the budget deficit below the EU-prescribed limit of 3% GDP and make sure the country meets all the criteria to adopt the single currency.

To square the circle that will mean tax rises, among them, says Erste Bank: the reintroduction of progressive taxation of personal income and thus the abolition of the flat tax rate; higher taxation for small unincorporated entrepreneurs; special taxes and/or tax rates for specific sectors (telecommunications, banks, energy companies), 30% has been floated; and higher corporate tax income for all companies, from 19% to 21%.

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