Bloomberg News

Czech PM Seeks Confidence Vote to Show Budget-Cut Force

April 24, 2012

Czech Prime Minister Petr Necas will ask lawmakers to prove that his Cabinet still has enough backing to push through budget-deficit cuts after the breakup of the ruling coalition.

Necas will initiate an April 27 confidence vote to see whether a group that split off from a former coalition party attracted enough defectors to guarantee a majority. Deputy Premier Karolina Peake, who left the Public Affairs party last week, said yesterday she had enough votes to keep the Cabinet in power, helping Necas adjourn a parliamentary session today.

“I have received information from the vice premier that she has 10 signatures showing a willingness to support the government, and we will verify this in the vote,” Necas told reporters in Prague late yesterday. “We will find out, in the most transparent way, whether the government has a sufficient majority.”

Governments are crumbling across Europe as German Chancellor Angela Merkel pushes for austerity to prevent the euro area from breaking up. Necas’s three-party coalition fell apart following clashes over spending cuts and personnel issues as the administration prepares legislation to cut the budget deficit to within the European Union’s limit of 3 percent of economic output in 2013.

The debt crisis in Europe has already resulted in the ouster of leaders in Ireland, Portugal, Greece, Italy, Spain, Slovenia, Slovakia, and Finland.

Austerity Costs

Dutch Prime Minister Mark Rutte’s Cabinet offered to quit yesterday after the Freedom Party withdrew its support for the minority government on April 21, putting early elections on the horizon. Queen Beatrix asked the Cabinet to stay as a caretaker in the meantime. French bonds slid after results from a weekend presidential election showed Socialist Francois Hollande took more first-round votes than incumbent Nicolas Sarkozy.

Czech measures to narrow the fiscal gap, including an overhaul of the pension system, have helped curb funding costs. The yield on the Czech Eurobond maturing in 2021 fell three basis points, or 0.03 percentage point, to 3.249 percent, heading for the lowest close for the security ever. The koruna gained 0.2 percent to 24.971 per euro as of 4:13 p.m. in Prague.

While the economy returned to a recession in the second half of last year, Necas’s 20-month-old administration wants to push through tax increases and savings on pensions totaling 57 billion koruna ($3 billion) to meet the goal of reducing the gap to 2.9 percent of GDP next year from 3.1 percent last year.

Public Discontent

The budget measures also sparked public discontent. About 90,000 people marched through Prague on April 21 demanding early elections in a protest against spending cuts, the newswire CTK reported, citing police estimates. Trade unions, which organized the rally, said it was the largest popular protest since the fall of communism in 1989.

Early elections are a “terrifying nightmare” for all parties in the government because of declining support in opinion polls, political analyst Jiri Pehe said.

“None of the actors in the government crisis can afford early elections, as the Civic Democrats and TOP09 would lose ground significantly, while the Public Affairs and Peake’s platform would be erased from the political map,” said Pehe, who is also the director of New York University in Prague.

Necas backed down from a demand that he would only enter an accord with Peake if she created a parliamentary caucus, which requires at least 10 lawmakers. Peake said she has enough votes to guarantee a “safe majority” for the government, without specifying whether she will form an official faction in the legislature.

Largest Majority

The breakup of the coalition ended the largest government majority in parliament since the Czech Republic became an independent state 19 years ago. Since taking power in 2010, the parties have repeatedly quarreled over personnel issues and measures to cut spending.

The Czech Republic has a history of political infighting. It’s had two minority governments and two interim Cabinets in the past 14 years, stalling previous efforts to control the budget deficit. In 2009, Prime Minister Mirek Topolanek lost a no-confidence motion halfway through the country’s six-month term as EU president.

Public Affairs clashed with the other two government parties over its demands to secure more money for teachers’ salaries and transportation infrastructure. Cuts in all budget allocations are needed to meet the government goal of reducing the deficit before balancing public finances in 2016.

Necas’s Civic Democrats and the TOP09 party hold 93 of the legislature’s 200 seats, while Public Affairs had 21 before Peake’s exit. Peake and seven other lawmakers who defected from parties of the former coalition today helped Necas push through a motion adjourning the parliamentary session until May 2.

Party Chief Convicted

Necas refused to cooperate with Vit Barta, the former head of Public Affairs’ parliamentary caucus and the party’s sponsor, who was convicted of bribery on April 13. Barta, who owned a detective and security company before he was elected to parliament, rejected the charges and appealed the verdict.

Public Affairs’ support in opinion polls has fallen the most among the three former coalition parties since the elections. It wouldn’t reach the 5 percent threshold to enter parliament if elections were held now, according to a poll by the CVVM company.

The opposition Social Democrats would win elections now, followed by the Communist Party, according to the CVVM survey, which was conducted among 1,048 respondents and released April 18. Necas’s Civic Democrats, or ODS, and TOP09 wouldn’t get enough votes to create a majority government together, the poll showed. The CVVM didn’t publish a margin of error for the poll.

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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