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Czech Cabinet Loses Confidence Vote as Early Elections Loom

Aug. 7 (Bloomberg) -- The Czech Republic’s interim government of Prime Minister Jiri Rusnok lost a confidence vote as lawmakers rejected President Milos Zeman’s hand-picked cabinet and a drive to force early elections gained momentum.

The former pro-austerity ruling coalition and its allies blocked approval of the administration in a 100-93 vote in the 200-seat lower house. The poll-leading Social Democrats, which was in opposition to the previous government, called for a snap vote “as early as possible,” while former coalition partner TOP09 will join in the push. The Prague-based legislature will reconvene tomorrow to discuss the next steps.

“The TOP09 caucus decided that it will support early elections,” Petr Gazdik, the head of the TOP09 parliamentary caucus, told lawmakers.

The political crisis erupted in June when a scandal involving illegal spying and graft allegations sank ex-Premier Petr Necas’s government and Zeman brushed aside lawmakers in forging his own ministers, led by political ally Rusnok.

“We don’t live in a system where the president picks his own government, which either wins or doesn’t win confidence,” Marek Benda, the parliamentary caucus head of Necas’s Civic Democrats, said in the debate before the vote. “We live in a system where the government is accountable to parliament.”

The yield on 10-year government koruna debt, which reached an all-time low of 1.48 percent on May 17, has risen since the start of the political crisis to 2.26 percent today, staying below comparable U.S. Treasuries, according to data compiled by Bloomberg.

The technocrat cabinet, which included unsuccessful presidential candidate Jan Fischer as finance minister, needed a simple majority to win the confidence vote. Rusnok wanted to focus on pulling the $196 billion economy out of a record-long recession.

“We are in the middle of a political crisis that most of us didn’t cause, but we all need to cope with it,” Zeman said in his appeal to lawmakers to back Rusnok’s cabinet. “I proposed the only possible solution.”

To contact the reporters on this story: Peter Laca in Prague at placa@bloomberg.net; Michael Winfrey in Prague at mwinfrey@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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