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Czech Premier Battles Tycoon Minister as Budget Talk Loom

April 4 (Bloomberg) -- Czech Prime Minister Bohuslav Sobotka is clashing with billionaire Finance Minister Andrej Babis over budget spending, a sign of strain in the coalition government as it heads for talks on next year’s public finances.

Babis refuses to raise payments to hospitals by about 2.1 billion koruna ($105 million) this year to compensate for a decision to scrap medical fees, Sobotka said at televised news conference in Prague. Babis also opposes a plan by Sobotka’s Social Democrats to extend state aid to an unprofitable coal mine to prevent the loss of thousands of jobs, the premier said.

“We agreed that the state should be saving money,” Babis told state television today. “The Social Democrats only want money. They don’t know what it means to save money, or how to function rationally.”

The conflicting priorities are testing the ruling coalition and setting the stage for April 9 talks on next year’s budget, the cabinet’s first attempt to draw up a fiscal plan to support economic growth after a record-long recession. A month after forming the government, Babis and Sobotka disagree on how to finance increased spending on welfare and infrastructure, with the finance minister opposing proposals to raise corporate taxes.

Relations between party leaders are deteriorating after Sobotka urged Babis last week to sell his Agrofert business to “eliminate questions about any conflict of interest,” the news service CTK reported, citing Sobotka. Agrofert is a holding company whose assets include fertilizer makers, food producers, forestry and two of the three largest nationwide newspapers.

Second Richest

Babis, the second-richest Czech with a fortune estimated at about $2 billion by Forbes, refused, telling Sobotka he could dismiss him or find another coalition partner if he is bothered by his ownership of Agrofert.

Babis’s ANO party, which unexpectedly finished second in October elections, is leading in opinion polls and the finance minister tops surveys of most popular politicians. Support for Sobotka’s Social Democrats, the top vote getter in the ballot, has declined since October.

Coalition bickering hasn’t reached the magnitude to bring down the government, according to Jiri Pehe, director of New York University in Prague.

“Sobotka and Babis need each other,” Pehe said. “Their political survival depends on the success of their cooperation.”

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Paul Abelsky, Michael Winfrey

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