Bloomberg News

Czech Cabinet Foe Faces Minister in Presidential Runoff

January 14, 2013

Czech Foreign Minister Karel Schwarzenberg

Czech Foreign Minister Karel Schwarzenberg is an advocate for deeper integration with the EU. Photographer: Radek Mica/AFP/Getty Images

Czechs will chose between the country’s foreign minister and a former premier opposing the government’s economic plans in a Jan. 25-26 runoff in the nation’s first direct presidential election.

Milos Zeman, the former Social Democrat leader who ran as an independent, took 24 percent in the past weekend’s first round, according the Electoral Committee said on the Czech Statistics Office’s website on Jan. 12. Karel Schwarzenberg was the surprise runner-up with 23 percent. The committee meets today to review the results.

As the eastern EU member of 10.5 million is mired in its second recession since 2009, government policies aimed at cutting the budget deficit are the focus of the campaign. Zeman criticized Schwarzenberg for backing government bills including increases in the sales taxes, an overhaul of the pension system and the return of church property confiscated by the communists.

“A right-wing politician is the one who votes for church restitution, votes for a higher value-added tax on basic food and drugs, is the one who votes for a pension reform favoring the richer over the poorer,” Zeman said in a debate on public television yesterday.

The government credits policies designed to curb the budget deficit with helping to reduce borrowing costs. The yield on the 5-year koruna note fell 178 basis points, or 1.78 percentage points, in the past year to 0.826 percent today, according to generic data compiled by Bloomberg.

Replacing Klaus

The winner of the second round will replace Vaclav Klaus, who was the Czech Republic’s most high-profile critic of the EU and its common currency. Term limits prevented him from seeking the post for a third time after his current mandate ends on March 7. Klaus in 2009 delayed signing the EU’s Lisbon Treaty.

The president, who was until now elected by lawmakers, selects the political leader who attempts to form a government after general elections and influences monetary policy by holding the sole right to name central bank board members. The position’s powers haven’t changed under the new voting system.

The first round of the vote was “the worst debacle for the right in the post-communist era,” Klaus said yesterday. Premysl Sobotka of Prime Minister Petr Necas’s Civic Democrats, a party founded by Klaus, received 2.5 percent support.

Social Democrats, the largest opposition party that leads in opinion polls, recommended their supporters vote for Zeman in the second round, as did the Communist Party.

‘Vocal Critic’

“Necas’s government is not planning further reforms in this parliamentary term; yet, should the necessity arise due to unforeseen circumstances, Zeman would be unlikely to take a back seat and would be a vocal critic of measures that would clash with his center-left leanings,” Otilia Simkova, an analyst at Eurasia Group in London, said in an e-mail.

Zeman, 68, and Klaus were rivals in the 1990s when they headed the two largest political parties in the country. Zeman, an economist who worked as a forecaster in the academy of science shortly after the fall of communism in 1989, eventually won the premier’s office in 1998 when his Social Democrats formed a minority government that ruled thanks to an agreement with the opposition Civic Democrats, then led by Klaus.

His economic program for the presidential race included calls for more state investment and the restoration of progressive taxation for higher earners. He has opposed Necas’s pension overhaul, a plan designed to boost private retirement savings that was among reasons cited by Standard & Poor’s when it raised the rating on the country’s debt two steps to AA-, its fourth-highest grade, in 2011.

Stark Contrast

Zeman, who was prime minister from 1998 to 2002, said he would name central bankers who support economic growth and not strive only to meet the inflation and currency-stability goals mandated by the law.

Schwarzenberg, 75, is an advocate for deeper integration with the EU. Born into an aristocratic family, he was forced to leave the then Czechoslovakia for Austria after the communists took power in 1948. He was a close friend of the country’s first post-communist president, Vaclav Havel, serving as his chancellor, and became foreign minister in 2007.

In 2009, Schwarzenberg was a member of the Cabinet that collapsed while the Czechs held the EU’s rotating presidency, prompting him to start his own party, TOP09, which promotes EU ties and fiscal responsibility. In 2010, it joined a coalition to form a three-party government with Necas as premier. TOP09’s deputy chairman, Miroslav Kalousek, is the finance minister pushing for deficit cuts.

“Although a leftist candidate won, I don’t see this as such a big win for the left,” Schwarzenberg said on his Facebook page after the results showed his second-place finish.

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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