Bloomberg News

Czech Premier Faces Growing Unions Protests on Austerity

May 22, 2012

Czech trade unions agreed to expand protest rallies in front of ministries and warned of a possible nationwide strike as Premier Petr Necas faces growing public discontent against austerity plans that have pushed borrowing costs to record lows.

The unions will hold demonstrations in front of five ministries and kept open the possibility of calling a nationwide strike in the second half of the year, Jaroslav Zavadil, the head of the umbrella trade union organization, told reporters in Prague today.

“So far, we decided about not holding the strike in the first half of the year,” Zavadil said. “That doesn’t mean that it won’t take place after the holidays, in September or October.”

Governments in Europe are falling in a wave of anger over austerity prompted by the debt crisis in the euro region. Earlier this month French President Nicolas Sarkozy was ousted and a parliamentary vote in Greece ended in a gridlock. Necas is pushing for spending cuts even as the Czech economic recession deepened in the first quarter of 2012.

Protest March

Union leaders led a march today of about 4,000 people through Prague, blocking the streets in front of the government building, Czech Television reported, citing police estimates. The action followed an April 21 rally of as many as 90,000 people, which the trade unions called the largest public protest since the fall of communism in 1989.

While the economy has contracted in three consecutive quarters, Necas’s Cabinet plans to push through 57 billion koruna ($2.9 billion) worth of budget measures, including a second increase in the sales tax in as many years. The Cabinet wants to narrow the deficit to 2.9 percent of economic output in 2013 from the targeted 3 percent this year.

The yield on the Czech Eurobond maturing in 2021 fell to an all-time low 3.162 percent May 15, according to data compiled by Bloomberg. The yield was 3.168 percent today.

Public discontent over austerity measures has worsened amid allegations of corruption in top-level politics. Some 89 percent of Czechs don’t perceive the government as fighting graft, according to a poll by the Stem company, taken among 1,084 people from April 18 to April 29.

In Transparency International’s Corruption Index measuring the perceptions of the degree of corruption as seen by business people and country analysts, the Czech Republic ranked 57th in 2011, tied with Saudi Arabia and Namibia. The Czech index was 4.4 points, according to Transparency International, worse than the 3.9 points in a 2001 survey.

Vit Barta, a senior member of the former ruling-coalition party, Public Affairs, 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.

More Cases

Pavel Bem, a former deputy chairman of Necas’s Civic Democrats and former mayor of Prague, suspended his membership in the party after the newspaper Mlada Fronta Dnes published transcripts of phone calls he had with a businessman in which they discussed the management of city property. Bem said he didn’t do anything illegal.

In the most recent case, police last week arrested David Rath, the former head of the central Czech administrative region and a member of parliament for the largest opposition party, the Social Democrats, accusing him of corruption linked to the use of public funds.

Rath, a frequent critic of Necas’s Cabinet, rejected the charges and said his arrest was politically motivated, the newswire CTK reported today.

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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