Czech Budget Cuts Face Veto as Opposition Party Wins Majority in Senate

Czech Social Democrats vowed to veto cuts in welfare programs after securing a Senate majority in weekend elections, potentially delaying Prime Minister Petr Necas’s drive to narrow the budget deficit.

The Social Democrats won 12 races in run-off contests Oct. 22-23, giving them 41 seats in the 81-member Senate. The chamber, which must approve all legislation except the budget, had been controlled by Necas’s three-party coalition.

“There will certainly be amendments to laws affecting families with children, affecting workers,” Zdenek Skromach, deputy chairman of the Social Democrats, said yesterday on state-run Czech Television. The party will veto bills that “are very restrictive and inappropriate.”

Necas’ three-party Cabinet has said it will reduce spending as it seeks to halve the fiscal deficit to less than 3 percent of gross domestic product by 2013. The coalition, which has enough votes in the lower house to override a Senate veto, pledged to continue its program.

“We simply have to take into consideration the fact that the approval of laws will take five weeks longer,” Finance Minister Miroslav Kalousek told reporters after the election results were announced.

Labor Unrest

The ruling parties have lost support since taking power in July and announcing plans to reduce spending, including a 10 percent cut in public wages. The agenda has drawn the ire of state workers, with as many as 30,000 policemen, firemen and medical workers marching through Prague in protest on Sept. 21.

Photographer: Michele Tantussi/Bloomberg

Czech Prime Minister Petr Necas. Close

Czech Prime Minister Petr Necas.

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Photographer: Michele Tantussi/Bloomberg

Czech Prime Minister Petr Necas.

The koruna, which has gained 4.6 percent against the euro since the end of June to be the world’s best performer of the currencies tracked by Bloomberg, was unchanged at 24.563 to the common currency at 9:30 a.m. in Prague.

“The results could initially impair the koruna as some may fear that the government will be hindered in its austerity reforms,” BNP Paribas SA said in a note to investors today. “However, the fact that the Chamber of Deputies, in which the government still has a comfortable majority, can outvote the Senate’s vetoes suggests that reforms will still go on.”

Declining Support

Necas’s Civic Democrats lost the Oct. 15-16 elections in Prague, relinquishing control of the capital for the first time since the Czech Republic gained independence in 1993.

Twenty-seven Senate seats were contested in the run-off elections, with the Civic Democrats winning eight and TOP09, a governing coalition partner, taking two, according to the statistics office in Prague. Public Affairs, the third ruling party, didn’t win any seats in the Senate.

“There was more at stake for the voters of the left because government reforms will affect them much more than the richer voters of the right,” said Jiri Pehe, a political analyst and director of New York University in Prague. “The Senate might serve at least as a brake for the reforms.”

The ruling parties have 118 of 200 seats in the lower house of parliament.

The coalition wouldn’t have won a majority in the lower house if elections had been held earlier this month, a STEM poll published Oct. 18 showed. The parties would have garnered 95 seats, with the Social Democrats and Communists taking 105, according to the poll of 1,244 eligible voters surveyed Oct. 1- 9. The margin of error was 1.5 percent to 2.5 percent.

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net

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