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Czechs May Elect President Set to Clash With Government

The Czech Republic’s first direct presidential election threatens to usher in a leader who will clash with Premier Petr Necas’s economic plans as the minority coalition aims to curb the fiscal deficit amid a recession.

Balloting ended today at 2 p.m. in Prague as the ex- communist European Union member’s citizens voted for the third president since the country became an independent state 20 years ago. Vaclav 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.

The country is suffering its second recession since 2009. The economy is showing weak domestic demand as households and businesses cut spending due to government austerity programs and the euro area’s debt crisis, prompting the central bank to lower interest rates to effectively zero last year. Two former prime ministers, Milos Zeman and Jan Fischer, lead in opinion polls and are likely to advance to a run-off in two weeks. Results are expected later today.

“Should Zeman make it into the second round with Fischer, he is likely to rally the leftist vote, which has grown stronger in opposition to austerity implemented by the government,” said Otilia Simkova, an analyst at Eurasia Group in London. “Necas’s relationship with Klaus has recently been confrontational, but this does not mean he will be relieved by Klaus’s departure. Zeman would likely become an equally formidable critic.”

Austerity Measures

Necas has cut investment, raised the sales taxes and curbed spending on public wages since taking power in 2010, crediting the budget-deficit cuts with helping to reduce borrowing costs to record lows. Gross domestic product shrank for a third three- month period from July to September, matching the longest quarterly declines on record.

The koruna was little changed at 25.636 to the euro late yesterday. Its 2.1 percent loss in January is the second- steepest among emerging-market currencies tracked by Bloomberg.

Klaus, who was the Czech Republic’s most high-profile critic of the EU and its common currency, is forbidden by law to seek the post again after his second term ends on March 7. One of his most eminent acts during his 10-year presidency was to delay signing of the EU’s Lisbon Treaty in 2009.

The president, who was until now elected by lawmakers, selects the political leader who attempts to form a government after general 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.

Poll Results

Zeman led the latest opinion poll by Ppm Factum company with 25 percent support, ahead of Fischer with 20 percent. The poll was conducted among a representative sample of 959 people Jan. 1-6. It didn’t publish a margin of error. Running in third place in opinion polls with about 11 percent support is Vladimir Franz, a composer and painter known more for his head-to-toe tattoos than his politics. A candidate must receive 50 percent of the vote to win the elections outright.

The Czech Electoral Commission estimated turnout on the first day of voting at about 40 percent of the country’s 8.5 million eligible voters, the CTK news wire reported. If the pace continues, total participation may reach 60 percent, compared with about 35 percent in the first round of Senate elections in October last year, CTK said.

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

Opposing Plan

His economic program for the presidential race included calls for more state investment and restoration of progressive taxation of higher earners. He has opposed 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 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 the law.

“These two functions of the central bank are equally important,” Zeman said at an economic conference Jan. 8. “One of the main causes of the current crisis is undercapitalization of the economies.”

The first chance for the new president to amend the rate- setting central bank board will come in March 2014 when the term of Eva Zamrazilova ends.

Fischer, 62, rose to prominence in 2009 when the two main political parties picked the then-head of the statistics office to lead a caretaker Cabinet after the administration of Mirek Topolanek collapsed in the middle of the Czech EU presidency.

Communist Party

Also an economist, Fischer said during the campaign he wouldn’t name a government including ministers from the Communist Party, although he stopped short of ruling out naming a Cabinet that would rule with their tacit support. He has called his membership in the Communist Party before the regime collapsed in 1989 “a mistake.”

Franz, who has never held political office and admits to little knowledge of economics, has shaken up the campaign with his straight talk and body art accented by the red, blue and green swirls that envelope his entire face.

Supported mainly by younger voters, the rise of his candidacy has shown the disdain many Czechs have for politicians they feel are corrupt.

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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