Bloomberg News

Czechs Voting for President as Clash With Government Looms

January 25, 2013

Presidential Candidates Milons Zeman and Karel Schwarzenberg

Presidential candidates Milos Zeman, left, and Karel Schwarzenberg speak prior to the pre-election television debate on January 24 in Prague. Photographer: Michal Cizek/AFP/Getty Images

The Czech Republic’s first direct presidential election may vote in a new leader set to oppose the government’s economic program as the minority coalition extends its austerity measures amid a recession.

Former Prime Minister Milos Zeman is seen as the favorite in opinion polls in a run-off against Karel Schwarzenberg, the millionaire prince and foreign minister who is promoting closer ties with the European Union after a decade under Vaclav Klaus, a critic of the EU and euro. Voting started at 2 p.m. in Prague.

As the eastern EU member of 10.5 million struggles to exit its second recession since 2009, government deficit cuts were the campaign’s focus. Zeman criticized his opponent for backing increases in sales taxes and an overhaul of the pension system.

“Just like Klaus, Zeman as the president will stretch the constitution and try to see how far he can go in his activism against the government,” said Jiri Pehe, a political analyst and director of New York University in Prague.

The two days of balloting will elect the ex-communist EU member’s third president since it became an independent state 20 years ago. Klaus, an economist who as premier oversaw the transition from a centrally-planned to market economy two decades ago, replaced the late Vaclav Havel in 2003 and is forbidden by law to seek the post again.

Austerity Benefits

The government credits its austerity measures with helping to cut borrowing costs. Yields on five-year koruna notes fell 172 basis points, or 1.72 percentage points, in 2012, touching a record-low 0.66 percent on Dec. 27. The five-year rate rose 9 basis points to 0.87 percent as of 4:14 p.m. in Prague, according to generic rates compiled by Bloomberg.

The president, who until now had been elected by lawmakers, selects the leader who attempts to form a government after 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.

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

More Investment

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

Zeman said he would name central bankers who support economic growth and not strive only to meet the inflation and currency-stability goals mandated by law.

The run-off vote comes as a recession and corruption fuel support for the political heirs of Havel’s Communist-era jailers, who endorsed Zeman. Schwarzenberg, a former Havel aide, wants to bolster U.S. and EU ties and campaigns for human rights across the globe.

Pussy Riot

He supported members of Russian punk band Pussy Riot last summer when they were convicted for a stunt against President Vladimir Putin and said Necas’s view that backing the group may hurt Czech exports to Russia was “shocking.”

After Schwarzenberg defied the polls to finish a surprise second in the first round, the race appears too close to call.

Oddsmakers at the largest Czech betting companies initially saw the prince as the favorite, though the odds reversed this week. Zeman also led in the only opinion poll published between the two election rounds, 54 percent to 46 percent for Schwarzenberg. The survey by Ppm Factum Research company was taken among a representative sample of 1,061 Czechs and published Jan. 18.

Schwarzenberg sparked a wave of fresh publicity today by failing to follow the required procedure while voting. He cast his ballot without first placing it inside the obligatory envelope, invalidating his own vote, the public Czech Television channel reported, citing his spokesman, Marek Prazak.

Voting stations close at 10 p.m. in Prague and open again tomorrow at 8 a.m. Results are expected soon after polls close at 2 p.m.

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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