Czech Prime Minister Petr Necas warned snap elections may be held quickly if the smallest member of the three-party ruling coalition makes good on its threat to quit amid preparations to cut the budget deficit.
Public Affairs yesterday said Necas needs to overhaul government personnel in order for it to remain in the coalition. The premier rejected the ultimatum, telling reporters in Prague he “isn’t afraid” of early elections. Necas today set a deadline of April 10 for all three parties to agree on their continued rule with a “safe majority.”
The government must find 42 billion koruna ($2.3 billion) in savings measures next year to reduce the public finance deficit below the European Union’s limit of 3 percent of economic output. The nation would need to hold elections “as early as possible” if the Cabinet falls to give a new administration time to draft a 2013 budget, Necas said.
“The government must, by September 30, present a credible budget to Parliament, and this budget must lead to a deficit of below 3 percent,” Necas told reporters late yesterday. “Waiting until autumn would be absolutely irresponsible.”
Government plans to narrow the budget deficit have helped curb the country’s funding costs. The yield on the Czech Eurobond maturing in 2021 fell to an all-time low of 3.433 percent today, according to data compiled by Bloomberg. The koruna was little changed at 24.615 to euro at 3:53 p.m. in Prague.
“Early elections now would, at the very least, complicate and delay measures needed to reduce the deficit next year,” Ales Michl, an economist at Raiffeisenbank AS in Prague, said by phone. “That means there would be a risk that the goal of cutting the deficit below 3 percent of gross domestic product next year would not be met.”
The Czech Republic has a history of political infighting. It’s had two minority governments and two interim Cabinets in the past 14 years, stalling previous efforts to control the budget deficit. In 2009, Prime Minister Mirek Topolanek lost a no-confidence motion halfway through the country’s six-month term as EU president.
Necas will meet with Public Affairs and the third coalition member, TOP09, separately tomorrow and all three parties will talk on April 10, the premier said in a statement. He offered to overhaul the government’s program to identify plans that won’t be met because of time pressure or spending cuts.
“If an agreement is reached, the government will approve on April 11 measures required for preparing budgets for 2013 and 2014,” Necas said in the statement. If there is no agreement, Necas will propose snap elections to be held early, with June 22 and June 23 being the best option.
The ruling coalition, which in 2010 won the largest majority since the Czech Republic became an independent state 19 years ago, has repeatedly quarreled over personnel issues and measures to cut spending. The government averted a collapse in June 2011 in a dispute over the division of Cabinet posts that had prompted a similar ultimatum from Public Affairs.
Public Affairs ministers will resign as of May 1 and the party will leave the coalition unless Necas presents steps to “regain the lost trust of citizens,” the party said in an e- mailed statement yesterday. Necas has until April 26 to meet its conditions and then present a new Cabinet, which would seek a confidence vote in parliament, it said.
“I have informed the top representatives of Public Affairs that the moment its ministers tender their resignations, there won’t be any more room for further talks with the party about the continued cooperation of the three coalition parties,” Necas said in a statement late yesterday.
Public Affairs showed an internal rift today before a regular weekly Cabinet meeting. Ministers for the party have signed their resignations, although they won’t tender them immediately, Chairman Radek John said in a statement. Transportation Minister Pavel Dobes, nominated by Public Affairs, told reporters he won’t resign.
Since taking power, the ruling coalition has pushed through measures to curb the deficit, including increases in the value- added tax and the retirement age that the International Monetary Fund said may eliminate most of the shortfall in the pay-as-you- go pension system.
Public Affairs’ support in opinion polls has fallen the most among the three ruling parties since the elections. It wouldn’t pass the 5 percent threshold to enter parliament if elections were held now, according to a poll by the Stem company from Feb. 22 to March 2 among 1,096 respondents. The margin of error was plus or minus 1.5 percentage points to 2.5 percentage points.
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