Czech Leader Picks Ex-Finance Minister as Prime Minister

Czech President Milos Zeman named Jiri Rusnok, a former finance minister, to head the interim government, snubbing parties from the ruling coalition and opposition in a move designed to trigger early elections.

Zeman, the Czech Republic’s first directly elected head of state, made his choice even as political parties said they wouldn’t back it. Rusnok will need parliamentary approval after Premier Petr Necas resigned June 17 amid a spying and bribery scandal. The Civic Democratic party objected to the move and said its coalition has the 101 votes needed to stay in power.

“The only way to initiate early elections in the Czech Republic is to name a technocratic government,” Zeman said after today’s naming ceremony in Prague castle. “Most of the public, and I don’t mean just my voters, wouldn’t want” a continuation of the current coalition “with or without Necas.”

A technocratic government would bypass the current three-way ruling coalition, which has proposed parliamentary Speaker Miroslava Nemcova for premier as it tries to prevent the early ballot backed 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 a record-long recession.

Spying Scandal

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, credits deficit reduction with helping to cut borrowing costs.

The yield on the Czech 10-year koruna bond, which reached an all-time low 1.48 percent on May 17, fell 11 basis points, or 0.11 percentage point, to 2.4 percent as of 5:10 p.m. in Prague, holding below comparable U.S. Treasuries, according to data compiled by Bloomberg.

The Civic Democrats, the strongest party in coalition that backed Necas, would get 8 percent in an election compared with the 20 percent they received in the 2010 ballot, the Prague-based polling company PPM Factum said June 21.

“The Social Democratic Party insists on early elections,” leader Bohuslav Sobotka told reporters after Zeman named Rusnok. A vote on dissolving parliament, a pre-condition for calling the early election, may take place in mid-July, he said.

Confidence Vote

By law, Rusnok’s government needs to win a simple majority at a confidence vote in the lower house within 30 days of being appointed. 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.

Rusnok, 52, will resign as chief executive officer of ING Groep NV’s Czech pension fund on June 30, spokeswoman Daniela Velova said by phone. He served as Zeman’s finance minister in 2001-2002, a period when the fiscal deficit widened to 6.5 percent of economic output from 3.6 percent.

“There is no other majority in parliament than the solution that we proposed,” Nemcova said today. “We are wasting our time with an attempt that we already know is a dead-end.”

The Social Democrats, promised to raise some income taxes to pay for higher spending the party says is needed to revive the economy. The party would get 29 percent in an election, compared with their 22 percent showing in 2010, according to the June 14-20 poll of 945 people by PPM Factum, which didn’t provide a margin of error.

Sobotka said his party won’t support a technocratic Cabinet and will seek to secure the 120 votes in parliament needed to dissolve the assembly and force a snap election.

“Waiting for early elections would be like Waiting for Godot,” Zeman said. “The opposition doesn’t have the power to get 120 votes and the ruling coalition hasn’t so far shown any interest to be a part of the 120 votes.”

The Czech Republic has a history of political instability. It’s had seven governments led by six prime ministers since Zeman finished his four-year term in 2002 and two interim Cabinets since 1998.