Czech Republic Prime Minister loses confidence vote

Czech Republic Prime Minister loses confidence vote

Czech Republic Prime Minister Jiří Rusnok lost a parliamentary vote of confidence on August 7 by a count of 100-93 (with seven members absent). This development raises many questions about the future of Czech politics.

The origin of Rusnok’s rise to the prime ministry lies in a corruption scandal that erupted in June, when then PM Petr Necas was forced to resign amid allegations that a senior aide had abused her power. The advisor, Jana Nagyová (who was also reportedly Necas’s mistress) had ordered state intelligence to spy on Necas’s wife and had bribed members of parliament by offering them jobs in exchange for their support on certain pieces of legislation. A wave of arrests and public outcry swept Necas from the scene, leaving the position of prime minister open.

It was under these circumstances that President Miloš Zeman appointed Rusnok, a longtime ally and former economic advisor. This move stirred up controversy because the left-leaning Rusnok did not have the support of the rightist majority in parliament. Traditionally in Czech politics, the prime minister has been the choice of parliament. Miroslava Němcová, the current parliamentary speaker, would have been the legislature’s nominee. Parliament may retort by dissolving itself and holding early elections, which would otherwise take place in spring 2014. In the meantime, despite being voted out, Rusnok and his cabinet can stay on in the role of caretaker government.

Since taking office earlier this year by winning the first Czech presidential election to be determined by popular vote, Zeman has sought to increase the power of the presidency. Some have seen his recent maneuvering—appointing Rusnok along with a team of technocrats to form a government aligned with his political priorities—as a power grab.

The rejection of Rusnok sends a message to Zeman. It also gives rise to considerable uncertainty. The divide between the government and the parliament promises to stymie the political process at a time when the country is still trying to extricate itself from a recession. With interest rates near zero, Zeman and Rusnok envision infrastructure spending as a way to jumpstart the economy. Their opponents in parliament, meanwhile, favor austerity.

The political feud could undermine growth and scare potential international investors away from the Czech market, which has received $65 billion in foreign direct investment since 2003. As a sign of the impact of the political uncertainty, the yield on Czech 10-year koruna debt has risen from 1.48% in May to 2.254% since the Necas scandal broke.

In addition to the general implications of these recent developments, the situation may have an impact on a specific business opportunity. The Czech power group CEZ is currently in the process of evaluating bids on a €8-12 billion tender for expansion of the Temelín nuclear plant. The two remaining contenders are the Russian-Czech consortium Skoda JS, Atomstroyexport and Gidropress, on one hand, and the Japanese-US firm Westinghouse, on the other. It so happens that Zeman has pro-Russian leanings, while former PM Necas aligned more closely with the United States.

Zeman temporarily left his Social Democratic Party in 2007 to form a new party with funding from the Russian oil lobby. In May 2013, shortly after taking office, he delivered a speech at the Russian embassy promoting Russian investment in the Czech Republic, referring specifically to the Temelín project. Although Rusnok, who is generally supportive of Zeman’s agenda, has said his cabinet will not make a decision on the tender, it remains to be seen whether the president will take advantage of having a sympathetic cabinet (while it lasts) to advance Russian business interests in the country.

Categories: Europe, Politics

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