Czech Premier Sobotka Seeks to End Gridlock Amid Tensions

Bohuslav Sobotka on his first day as Czech prime minister pledged to end the political gridlock that’s paralyzed policy making for seven months and revive economic growth after the country’s longest recession on record.

Sobotka received the appointment from President Milos Zeman in Prague yesterday, almost three months after a snap election triggered by the June resignation of former Premier Petr Necas in a scandal over spying, sex and bribery.

“Our main priorities will include restarting economic growth, supporting the creation of new jobs, improving the functioning of the state and restoring people’s trust in politics,” Sobotka, 42, told Zeman.

The coalition led by Sobotka aims to reverse a three-year austerity drive that secured emerging Europe’s lowest borrowing costs while contributing to a six-quarter economic slump. The new premier has a history of feuding with Zeman, which risks undermining plans for more fiscal stimulus

Proposals for raising corporate taxes to fund welfare and infrastructure spending also face resistance from future Finance Minister Andrej Babis.

The yield on 10-year Czech government debt has averaged 3.8 percent over the past decade, compared with 5.6 percent for Poland, the EU’s largest post-communist economy, and 3.5 percent for higher-rated France. (GFRN10) The Czech 10-year yield fell 5 basis points, or 0.05 percentage point, to 2.34 percent yesterday, holding below comparable U.S. Treasuries. (USGG10YR)

‘Strong, Stable’

Before Sobotka can dive into policy debates, he needs to convince Zeman to drop his opposition to some of the candidates for ministerial jobs. The premier, who assembled a coalition between his Social Democrats, Babis’s pro-business ANO party and the Christian Democrats, says the president should have no such consideration.

“I’m confident that the Czech Republic will very soon have a strong and stable government,” Sobotka told Zeman yesterday.

Zeman, prime minister from 1998 to 2002, has been reshaping his remit since he won the country’s first direct presidential election last year. While his predecessors Vaclav Havel and Vaclav Klaus played a more ceremonial role, Zeman showed his intention to be actively involved in politics by snubbing parliament and appointing a technocratic cabinet after Necas’s resignation.

Sobotka, Zeman

The tension between the president and the premier may originate from a failed 2003 presidential bid by Zeman, who later named Sobotka among former allies he blamed for not supporting his candidacy. In a 2012 book, he called the leader of the group, then-premier Vladimir Spidla, a “traitor.” Sobotka has named Spidla his chief adviser.

Sobotka also accused Zeman, who led the Social Democrats from 1993 to 2001, of instigating a leadership challenge after the party’s victory in October elections. Sobotka was criticized for a worse-than-expected showing of 21 percent, edging ANO’s 19 percent, with about 5 fewer percentage points than pre-election polls indicated.

The future premier crushed the rebellion and proceeded to negotiate the three-way coalition that will control 111 of parliament’s 200 seats.

Zeman’s efforts to influence government policies may be an incentive for the coalition partners to stick together and avoid repeating the “traumas” that political parties experienced in the past year, Jiri Pehe, director of New York University in Prague, said by phone.

‘Expansionary View’

“Zeman, with his expansionary view of the presidency, is an opponent against whom the parties and the government can’t afford to show any weakness,” Pehe said. “The unofficial motto for the coalition parties will be an effort to protect the parliamentary system.”

Sobotka, a member of parliament since 1996 who served as finance minister in 2002-2006, said the coalition will prepare constitutional changes to limit the president’s scope of action.

The premier played down the personal animosity between him and Zeman. He said the president agreed with his policy priorities and has no interest in a Social Democrat cabinet failing.

“The moment the government is created and wins confidence in parliament, until it loses it, the president’s options to interfere with the practical running of the state are very limited,” Sobotka said in a Jan. 14 interview. “I don’t think there will be some permanent conflicts with the president.”

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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