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Czech Premier Wants Early Vote If Cabinet Loses Majority

April 18 (Bloomberg) -- Czech Premier Petr Necas wants snap elections in June if lawmakers that splintered from the smallest ruling-coalition party can’t guarantee government support in parliament.

Necas wants Deputy Premier Karolina Peake, who quit the Public Affairs party yesterday, and other party members who followed her, to bring him assurances by April 23 that the government has a “safe” majority, he said today in Prague. Peake said she will form a new faction, remain in Parliament and support the Cabinet.

The coalition splintered as Necas’s 20-month-old government prepares legislation including tax increases and a cut in spending on pensions needed to trim the fiscal deficit to within the European Union limit of 3 percent of gross domestic product next year. The plan has helped attract investors into Czech bonds, pushing the government’s borrowing costs to a record low.

“Unless I receive clear information by Monday that the government has a safe majority, the right decision will be to hold early elections in June this year,” Necas told reporters before a series of meetings starting today. “A tight majority of 101 or 102 deputies wouldn’t make sense.”

Budget Changes

Measures to narrow the fiscal gap, including an overhaul of the pension system, have helped curb funding costs. The yield on the Czech Eurobond maturing in 2021 fell to an all-time low of 3.260 percent today, according to data compiled by Bloomberg.

The koruna has strengthened 3.4 percent against the euro since the start of the year, the eighth-biggest gain among 25 emerging-market currencies tracked by Bloomberg. It closed little changed at 24.755 per euro today.

Necas’s Civic Democrats and the TOP09 party hold 93 of the legislature’s 200 seats, while Public Affairs had 21 before Peake’s exit. Several Public Affairs lawmakers were following Peake, she said at a joint news conference with Necas and Finance Minister Miroslav Kalousek. She refused to specify how many.

The premier overcame a rebellion by Public Affairs’ leadership last week and united his government behind a plan to cut spending and boost revenue. The government wants to reduce the deficit to 2.9 percent of GDP next year from a targeted 3.5 percent in 2012 before balancing public finances in 2016.

‘Destructive Political Style’

Peake said yesterday she left the party because of its “destructive political style.”

Necas said he won’t cooperate with Vit Barta, the former head of Public Affairs’ parliamentary caucus and the party’s sponsor, who was convicted of bribery last week. Barta, who owned a detective and security agency before he was elected to Parliament, rejected the charges and appealed the verdict.

Necas will meet with the other coalition leaders on April 22 to formally end ties with Public Affairs, his party said in an e-mailed statement. The Civic Democrats will also start “intensive” preparations for an election campaign, according to the statement.

“My only question is whether our government has majority support in the Chamber of Deputies, and we need an answer to this within hours or days,” Kalousek, a member of TOP09, told reporters today before a regular government meeting. “We are waiting for the positions of individual Public Affairs deputies as to whether the government has, or doesn’t have, a majority.”

History of Infighting

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.

Peake’s splinter group from Public Affairs will probably be large enough to give Necas a majority in parliament, political analyst Jiri Pehe said.

“Even though these lawmakers are likely to support the government project more resolutely than Public Affairs under the de-facto leadership of Barta, such a government will be highly unstable,” said Pehe, who’s also director of New York University in Prague.

Related News and Information: Czech news: {NI CZECH BN <GO>} Top Stories: {TOP <GO>} Top economic news: {TOP ECO <GO>}

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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