Jan. 17 (Bloomberg) -- The Czech Republic took a step toward ending a seven-month power gap, appointing a new prime minister with the task of resolving a political crisis that’s paralyzed policy making.
President Milos Zeman named Bohuslav Sobotka, 42, prime minister at Prague Castle today, a reward for leading the Social Democrat party to victory in a snap election triggered by the June resignation of former Premier Petr Necas after a spying scandal. While Sobotka has assembled a coalition to support his government, he has a history of feuding with Zeman.
The Czech Republic is struggling to boost the economy after a three-year austerity drive aimed at shielding emerging Europe’s lowest borrowing costs triggered a record-long recession. The squabbles risk stymieing Sobotka’s plans for less restrictive fiscal policy, with an initiative of raising corporate taxes to fund welfare and infrastructure spending facing resistance from future Finance Minister Andrej Babis.
“Zeman and his people will try to feed political bickering among the parties that will fit the interests of the” president, Jiri Pehe, director of New York University in Prague, said by phone yesterday.
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. The Czech 10-year yield fell 6 basis points, or 0.06 percentage point, to 2.33 percent as of 3:44 p.m. in Prague, holding below comparable U.S. Treasuries.
“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 as such,” Sobotka told Zeman after he was named.
Before Sobotka can dive into the policy debate, 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.
“Our country is a parliamentary democracy, with the chamber of deputies playing the dominant role and the election to the legislature being the most important election,” Sobotka said in a Jan. 14 interview, adding he won’t change his cabinet lineup. “What is happening now is not only an issue for today, but also a precedent for the future.”
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 snubbed parliament by appointing a technocratic cabinet after Necas’s resignation.
The tension between Sobotka and Zeman 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, Pehe said.
“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.
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.
“It should clearly define the role of the government, the role of the president and of parliament, including setting the deadlines, and also making clear that the president can’t dismiss the prime minister without a constitutional reason,” Sobotka said.
Sobotka 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,” he said in the interview. “I don’t think there will be some permanent conflicts with the president.”
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