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Ex-Premier Opposing Cabinet Wins Czech Presidential Vote

Former Prime Minister Milos Zeman was elected president of the Czech Republic in the country’s first direct vote following a campaign slamming the government’s austerity measures in the midst of a recession.

Zeman got 54.8 percent of votes after two days of balloting in a runoff that ended yesterday, the Prague-based Czech Statistics Office said. He defeated Karel Schwarzenberg, the millionaire prince and foreign minister, who promoted closer ties with the European Union following a decade under Vaclav Klaus, a critic of the bloc and the euro.

As the eastern EU member of 10.5 million struggles to exit its second recession since 2009, government deficit cuts were the focus of the presidential race. Zeman derided his opponent for backing increases in sales taxes, an overhaul of the pension system and lack of state investments.

“A directly elected president is something like a voice of the citizens, making the mandate stronger to criticize a government that is very unpopular,” the 68-year-old said in an interview late yesterday on public Czech Television.

Zeman becomes the ex-communist EU member’s third president since it became an independent state 20 years ago. Klaus, an economist who as premier oversaw the transition from a centrally-planned to market economy two decades ago, beat out Zeman among others to replace the late Vaclav Havel in 2003. He was forbidden by law to seek the post again.

Austerity Measures

The government credits its austerity measures with helping to cut borrowing costs. Yields on five-year koruna notes fell 172 basis points, or 1.72 percentage points, in 2012, touching a record-low 0.66 percent on Dec. 27. The five-year rate stood at 0.87 percent on Jan. 25, according to generic rates compiled by Bloomberg.

Zeman’s presidency is a natural phenomenon as, together with Havel and Klaus, he is one of the three “strongest personalities” in Czech politics since the fall of communism in 1989, Premier Petr Necas told reporters after the voting stations closed yesterday.

While he said he hopes the two can have “standard cooperation,” Zeman sent a different signal, noting the government was being propped up by lawmakers who defected from parties that had left the ruling coalition.

Early Elections

“This isn’t a government that was elected in free elections,” Zeman said. “If the government is held up by a party that wasn’t elected, it would be appropriate to hold early elections.”

The president, who until now had been elected by lawmakers, picks the leader to form a Cabinet after elections. That’s often a key role in a country where balloting frequently fails to produce a majority. The head of state also influences monetary policy by holding the sole right to name central bank board members.

Necas’s three-party coalition lost parliamentary majority last year following clashes over personnel and budget issues. The government is ruling with support of unaffiliated lawmakers who have helped it push through a series of austerity measures and survive no-confidence motions.

Parliament’s Call

The government is accountable to parliament and that’s the only institution empowered to call early elections, Miroslav Kalousek, the finance minister and a member of Schwarzenberg’s TOP09 party, said today.

“It isn’t a decision for Milos Zeman to make,” Kalousek said in a television debate.

Zeman and Klaus were rivals in the 1990s, heading the two largest political parties. Zeman, an economist who worked as a forecaster in the academy of science after the fall of communism, won the premier’s office in 1998 when his Social Democrats formed a minority government that ruled in an agreement with the opposition Civic Democrats, then led by Klaus.

The presidential election came as a recession and corruption fuel support for the Communist party, the political heirs of Havel’s jailers, who endorsed Zeman.

Klaus’ Endorsement

Klaus endorsed Zeman before the run-off vote by saying his successor should be a person who spent his life in the Czech Republic, a swipe at Schwarzenberg whose aristocratic family was forced to flee the then Czechoslovakia after the communists took power in 1948.

Unlike Klaus, who refused to fly the EU flag above his Prague castle seat, Zeman envisages the transition of the EU into a federation with common foreign and defense policies, and supports the future adoption of the euro.

His economic program for the presidential race included calls for more state investment and restoring progressive taxation for higher earners. Zeman has opposed the government’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 investment grade, in 2011.

The president-elect said he would name central bankers who support economic growth and not strive only to meet the inflation and currency-stability goals mandated by law. Zeman may consider appointing a trade union representative as a policy maker, he said in one of the election debates.

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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