July 8 (Bloomberg) -- Czech Prime Minister Jiri Rusnok chose former technocrat Premier Jan Fischer as finance minister in his interim cabinet, handing this year’s presidential contender an economy mired in a record-long recession.
Fischer was also nominated to serve as deputy prime minister, Rusnok told reporters in Prague today. The 62-year-old graduate of Prague’s University of Economics in statistics and econometrics led a temporary cabinet for a year before 2010 general elections when the country suffered its deepest economic contraction.
Rusnok is completing negotiations to form his administration after President Milos Zeman named him prime minister two weeks ago. The Czech Republic, struggling to emerge from the longest economic recession on record, plunged into a political crisis after Premier Petr Necas resigned on June 17 amid a spying and bribery scandal. By picking Rusnok as prime minister, Zeman snubbed the three-party coalition that had backed Necas and said it held a majority in the 200-seat lower house of parliament to stay in power.
“We both agreed that this country needs to revive economic growth and fiscal policy should help to do so,” Fischer told reporters today. “Restrictions and cuts need to be done for sure, but return to growth is a priority.”
The yield on the Czech government’s 10-year koruna bond, which reached an all-time low 1.48 percent on May 17, was little changed at 2.26 percent today, holding 46 basis points below comparable U.S. Treasuries, according to data compiled by Bloomberg.
By law, Rusnok’s government needs to win a simple majority at a confidence vote in the lower chamber within 30 days of being appointed by Zeman. If it fails, it would stay in office on a caretaker basis and Zeman has no constitutional deadline for naming a replacement before the next scheduled elections in May 2014.
The three-way coalition is trying to prevent early elections demanded by the poll-leading Social Democrats. The main opposition party has pledged higher taxes and more spending to pull the $217 billion economy out of the recession.
Necas was forced to resign after police charged his closest aide with illegal spying. The scandal added to public discontent with austerity measures that hurt household spending. Necas, who quit after three years in power, credited deficit reduction with helping to cut borrowing costs.
Fischer served as vice president at the London-based European Bank for Reconstruction and Development starting in September 2010. He left the EBRD before running for the Czech presidency in the country’s first direct election for the post this year, failing to garner enough support to advance to the January run-off vote.
A former head of the Czech Statistics Office, Fischer rose to prominence in 2009 when he was selected to lead a caretaker administration after Mirek Topolanek’s government lost a no-confidence vote halfway through the country’s six-month term as European Union president.
He led the country during the deepest economic decline on record in 2009 as gross domestic product shrank 4.4 percent amid the global financial crisis following the collapse of Lehman Brothers Holdings Inc. The Czech fiscal deficit widened to a six-year high of 5.8 percent of economic output that year. Fischer’s mandate as premier was limited as lawmakers pushed through changes to his 2010 budget draft that increased the shortfall.
His powers to shape the state budget as the finance minister may be curbed again, according to Jan Vejmelek, the chief economist at Komercni Banka AS in Prague.
“He won’t have a chance to do any profound steps as his mandate’s length is limited,” Vejmelek said by phone today. “The only major thing ahead of him will be the annual state budget, but both revenue and expenditure frameworks are pretty set and the political representation wouldn’t allow a caretaker minister to push through any major changes.”
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