Czech Premier Fights to Survive Amid Spy Scandal

Photographer: Michal Cizek/AFP via Getty Images

Czech Prime Minister Petr Necas answers to journalists' questions during a press conference at the Czech government headquarters in Prague. Close

Czech Prime Minister Petr Necas answers to journalists' questions during a press... Read More

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Photographer: Michal Cizek/AFP via Getty Images

Czech Prime Minister Petr Necas answers to journalists' questions during a press conference at the Czech government headquarters in Prague.

Czech Prime Minister Petr Necas is in a scrap to keep his job after prosecutors said one of his closest aides illegally ordered intelligence officers to spy on three people and was involved in a bribery case where ex-lawmakers were offered jobs at state-owned companies.

Jana Nagyova, who runs Necas’s office and has worked with him since at least 2006, the head of military intelligence and five other people were charged, prosecutor Ivo Istvan said in Prague today. Officers seized as much as 150 million koruna ($7.8 million) in cash and some gold after raiding 31 homes.

Necas, 48, who refused to quit, is entering his fourth year in power after quelling a rebellion over austerity in his Civic Democratic Party to become the longest-serving Czech premier in a decade. The opposition Social Democrats, emboldened by an opinion-poll lead a year before elections, called a June 18 no-confidence vote, while Necas failed to get the full support of his party’s leaders at a meeting today.

“It looks like one of the gravest threats this government has faced so far,” said Martin Lobotka, an economist at Erste Group Bank AG’s Prague-based unit, in a report to clients today. “While markets normally ignore domestic political turbulences, short-lived volatility on foreign exchange and bonds cannot be excluded.”

Koruna, Stocks

The koruna weakened 0.2 percent to 25.743 per euro at 8:29 p.m. in Prague. It depreciated 0.5 percent yesterday, the biggest retreat among the world’s 31 major currencies tracked by Bloomberg, after the raids on government offices took place. The benchmark PX stock index fell for a fifth day to close the week 3.1 percent lower at a 10-month low.

The cost of insuring Czech bonds against non-payment for five years using credit-default swaps fell one basis point, or 0.01 percentage point, to 59, after reaching a two-month high of 63 yesterday, according to data compiled by Bloomberg.

The executive council of Necas’s party voted to back his premiership, parliamentary speaker Miroslava Nemcova told reporters in Prague after the panel’s four-hour meeting. The body voted by a ratio of two-to-one for the decision, Necas said.

“The situation is very hard, very difficult, and the fact that there were both positive and negative voices is natural in this situation,” Necas said, adding the voting showed “decent support” for him.

The Czech Republic, a former communist country, ranked 54th of 174 countries in Transparency International’s 2012 corruption perception index, tied with Latvia, Malaysia and Turkey. In the 27-member European Union, only Slovakia, Romania, Italy, Bulgaria and Greece did worse.

Bribery, Corruption

Civil servants and military officials were charged with abuse of power, while other detainees were charged with bribery and corruption, Istvan said. In the bribery case, ex-lawmakers were offered jobs in state-owned companies, according to Istvan.

Necas’s chief of staff Lubomir Poul was among the detained, though not charged, the Prague-based newspaper Lidove Noviny reported, without saying where it got the information.

Nagyova illegally asked intelligence officers to spy on a person in a “private” matter, Istvan said, without identifying the victim. He didn’t elaborate on other victims. She faces as much as five years in prison if convicted, according to Robert Slachta, the head of the police organized crime unit.

‘Personal Responsibility’

“If the prime minister refuses to take personal responsibility for the way this government has been engulfed by this huge scandal, if he refuses to resign, this will obviously only strengthen the dark streams of extremism and populism in our country,” said opposition leader Bohuslav Sobotka, the chairman of the Social Democratic Party, in parliament.

Prosecutors suspect that one of the detainees, a former head of military intelligence service, was involved in spying on Necas’ wife, which was ordered by Nagyova, CTK reported, citing attorney Tomas Sokol. Necas, who is separated from his wife, said in a statement on June 11 that the couple had agreed to an uncontested divorce.

Necas told lawmakers today that the various police probes are not linked, adding that all suspects should be investigated properly. It is “standard political practice” to offer jobs to allies, which can’t be viewed as bribery if no payments were involved, he said.

Nagyova has been the head of Necas’s office since he took power in 2010. She was the head of his office when he served as social affairs minister from 2006 to 2009 and advised the Defense Ministry in 2010, according to the government’s website. She didn’t answer calls to her mobile phone yesterday.

Police Raids

Hundreds of officers started raiding several locations on June 12, including the government building and the Defense Ministry, police spokesman Pavel Hantak told reporters yesterday. They also searched the city of Prague’s chief investment office, requesting documents about municipal contracts, the mayor’s press department said in a statement.

The Social Democrats, the largest opposition party that leads in opinion polls a year before elections, joined the Communist Party in calling for Necas’s resignation. Nemcova set the preliminary date for a vote against the Cabinet for June 18 in a special session that starts at 2 p.m.

The country should move toward early elections as soon as possible, Sobotka said. The opposition will “do everything possible” to make Necas leave the office, he said.

‘Never Before’

“Never before have there been arrests at the government offices, in the closest circles of the prime minister,” Sobotka told lawmakers after Necas refused to resign.

President Milos Zeman, a critic of the government and a Social Democratic prime minister from 1998 to 2002, met with Necas and Sobotka at the Prague Castle today and didn’t comment.

While the top leadership of Necas’s Civic Democrats expressed support for the prime minister, the premier faced criticism at the meeting of a wider executive council of the party, according to Jiri Pospisil, a deputy chairman.

“We all perceive the situation as very serious, some delegates are more critical,” Pospisil, who was fired as justice minister last year after he had opposed some of Necas’s policies, said at the party’s headquarters in a Prague business district. “For now, the government is functioning, but let’s wait for further developments. I’m convinced that the government as such isn’t threatened.”

Finance Minister Miroslav Kalousek, the deputy leader of the junior coalition party TOP09, said there was “no reason to lose confidence” in Necas and destabilize the government.

“We are at the crossroads for the development of democracy in our republic,” Foreign Minister Karel Schwarzenberg, who is also TOP09’s leader, told reporters. “Either the police has real evidence of something illegal and then what happened in the past hours may lead to a revival of our democracy. Or, god forbid, there is no evidence, then this would be a threat to our democracy.”

To contact the reporters on this story: Peter Laca in Prague at placa@bloomberg.net; Ladka Bauerova in Prague at lbauerova@bloomberg.net; Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

To contact the editors responsible for this story: James M. Gomez at jagomez@bloomberg.net; Balazs Penz at bpenz@bloomberg.net

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