IHS Global Insight Perspective
Yesterday, the new centre-right coalition government assumed power in the Czech Republic.
The three-party coalition has pledged to fight corruption, reduce the fiscal deficit, and reform the healthcare and pension systems.
With 118 seats in a 200-member parliament, the government has one of the strongest majorities in past years, and has a sound chance to remain stable throughout its four-year mandate.
End of Political Limbo
Prime Minister (ODS)
Foreign Affairs Minister (TOP09)
Finance Minister (TOP09)
Defence Minister (ODS)
Labour and Social Affairs Minister (TOP09)
Health Minister (TOP09)
Interior Minister (VV)
Justice Minister (ODS)
Industry and Trade Minister (ODS)
Transport Minister (VV)
Regional Development Minister (VV)
Environment Minister (ODS)
Agriculture Minister (ODS)
Culture Minister (TOP09)
Education Minister (VV)
Yesterday, Czech president Vaclav Klaus appointed the reform-orientated, centre-right government led by Prime Minister Petr Necas into office. The new three-party coalition consists of the right-leaning Civic Democratic Party (ODS), and the centrist TOP09 and Public Affairs (VV) parties. The coalition emerged in the wake of the May parliamentary election, where the centre-left Czech Social Democratic Party (CSSD) won the poll, but lacked suitable partners with which to form a government (see Czech Republic: 1 June 2010: Election 2010: Centre-Left Wins, But Czech Republic May Have Centre-Right Coalition). The new government holds 118 seats in the 200-member Chamber of Deputies, having one of the strongest majorities since the country's friendly split from Slovakia in 1993. The appointment of the new government also ends a year-long political limbo, replacing the popular but weak technocrat cabinet of Jan Fischer, which stepped in after the collapse of the previous centre-right coalition headed by former prime minister Mirek Topolanek in mid-2009.
The new government has only male ministers, which sparked strong criticism from the Czech Women's Lobby, an organisation promoting women's rights. This is indeed in stark contrast to neighbouring Slovakia, which now has its first female prime minister—Iveta Radicova—at the government helm. The ODS, which now holds 53 parliament seats, will preside over six ministries, including defence, justice, industry and trade, environment, and agriculture, as well as the prime ministerial post. The TOP09 will head five posts: foreign affairs, finance, labour, health and culture. The newcomer VV party, led by former investigative journalist Radek John, will look after four resorts, including ministries of the interior, transport, regional development, and education.
Eye on Reforms
The strong government stability will allow ministers to push through various reforms, curb corruption, and overhaul the Czech health, education, and pension systems.
These are the main points of the coalition agreement:
Coalition Party Profiles
The ODS was established by incumbent president Vaclav Klaus in 1991, and is the main representative of the centre-right in the Czech Republic. Slightly Eurosceptic but pro-reform, the party supports liberalisation of the economy without major state intervention. Its popularity suffered amid previous corruption allegations, and also amid controversial comments surrounding its former leader Mirek Topolanek. The appointment of Petr Necas at the party helm helped the ODS to woo voters and improve its image.
The liberal TOP09 was created in 2009, splitting from the Christian and Democratic Union-Czechoslovak People's Party, and soon became popular mainly due to its charismatic leader Karel Schwarzenberg. The party supports a free market, and is pro-European Union. It is currently the third strongest party in parliament.
The conservative-liberal VV has existed for almost a decade, but only emerged as an election contender in 2009 after the appointment of former investigative journalist Radek John at the party's helm. Its main platform is ensuring transparency and fighting corruption, two ever-present problems in the Czech Republic. This quickly won the party substantial public support, paving the way for its parliament entry with 24 seats.
- Public Finances: The Czech Republic's national debt is lower than the European average, but the fiscal deficit stood at 5.9% in 2009 and the government is determined to bring it down to 3% by 2013, thereby meeting one of the criteria for adopting the euro currency. Nonetheless, the government has not yet set a firm date for the country's Eurozone entry. The ministers have pledged not to increases taxes; instead they are planning to reduce social benefits including maternity and unemployment benefits, extend the period over which employers pay for sickness leave for their employees, and abolish tax relief. The government is also planning to cut wages of senior public officials and politicians by 5%, and also to cut annual state aid on housing construction.
- System Reforms: Liberalisation of the labour market is on the agenda, where it will be easier for employers to dismiss workers. The healthcare, education, and pension systems are also in need of an overhaul. With regards to the former, the government is so far planning to increase fees for hospital stays, keep the fee for visiting a general practitioner, and increase the fee paid for visiting a specialist without prior consultation with a general practitioner. Higher education fees will be introduced, but will be payable only upon the completion of studies. The new cabinet is also planning to increase the retirement pension age from the current 63 for men and 61 for women to 65.
- Energy: The new government has pledged to ensure modernisation and development of nuclear power stations in Temelin and Dukovany. Furthermore, it will also maintain limits on brown coal mining. The government also wants to support construction of the Nabucco gas pipeline to lessen the country's dependence on energy resources from Russia.
- Other Issues: The course of foreign policy will not substantially change, but the Czech Republic will promote European Union enlargement, especially concerning south-eastern European countries. The coalition also wants to implement changes to the political system through the limitation of non-constructive confidence votes, launching voting via the Internet, and changing the constitution to allow a direct presidential election from 2013.
Outlook and Implications
With a large majority, the new Czech government has a sound chance to remain stable throughout its mandate and also push through reforms, which the country badly needs. Nonetheless, the strong government presence of the two kingmaker parties could raise some concerns. Although some TOP09 ministers have already held posts during the Topolanek administration, the VV won parliamentary seats for the first time, and is the most unpredictable out of the three. During the government-formation discussions, the VV requested to head the interior ministry as its condition to join the ODS-TOP09 coalition, threatening to withdraw its support otherwise. Looking after the interior minister should help the VV to deliver on its pre-election promise to crack down on corruption. Furthermore, the division of current ministerial posts could also backfire on the ODS's future popularity. The party's ranking has increased with the appointment of down-to-earth Necas, whose image has not been affected by scandals. Nonetheless, the TOP09 holds some important posts, including finance, labour, and healthcare, which will see the most radical reforms in the future. This could put TOP09 as the main reformist should the planned changes bring positive results, and significantly improve its popularity. The TOP09 would then have the potential to replace the ODS as the main centre-right representative. The ODS has appointed its deputies in TOP09's main resorts, and this could lead to tensions between the two with regards to competence. With this in mind, Czech politics could still continue to be a heated affair, although with improved stability prospects.The success of reforms will depend on the government's future unity. The proposed reforms—especially those concerning retirement age and labour reform—could spark public discontent, resulting in strikes and demonstrations. The harsh austerity measures could also affect the government's popularity in the short term, but long-term prospects may look positive. The first test for the new government comes in a few weeks, when parliament will cast the vote on its confidence. Given the government's majority, this will be just a formality. Nonetheless, the ministers have to start preparing the 2011 budget bill, and its immediate popularity will be tested in the autumn, when the country is due to hold local and senate elections.