Czechs Set to Trigger Snap Ballot to End Political Crisis

The Czech Republic is poised to trigger an early election in a bid to end months of policy paralysis that’s curbed the country’s ability to revive economic growth after a record-long recession.

Lawmakers convened in Prague today to vote on a motion to dissolve parliament, a condition for calling the snap ballot. Four parties that backed the motion have more than the 120 votes needed to pass. No exact time for the vote has been set. If approved, President Milos Zeman has said he’ll schedule the election for the end of October.

The eastern European nation is seeking to stem political turmoil after illegal-spying and graft claims toppled ex-Prime Minister Petr Necas’s pro-austerity government in June. Zeman snubbed Necas’s coalition by naming his own interim cabinet, which lost a parliamentary confidence vote this month, extending the crisis and hampering the $196 billion economy’s pursuit of measures to aid the economy’s recovery.

“The next election will bring a fundamental decision about the future of the Czech Republic,” Karel Schwarzenberg, the ex-foreign minister and leader of the TOP09 party that supports early polls, said yesterday in a statement. “President Zeman’s ambition is mainly his own power.”

Even as Czech borrowing costs have risen since the start of the political crisis, those of regional peers Poland and Hungary have increased more, according to data compiled by Bloomberg. The yield on 10-year koruna bonds was at 2.34 percent as of 9:35 a.m. in Prague today, holding at 48 basis points, or 0.48 percentage point, below comparable U.S. Treasuries.

Election Push

The three parties that backed Necas’s previous administration had wanted a chance to form a new government before the confidence vote. Their alliance disintegrated during the session, prompting the TOP09 party to agree to join the Social Democratic Party in its push for an early ballot.

The Social Democrats have increased their lead in opinion polls since Necas’s cabinet collapsed and had 34 percent support in a June 14-July 14 survey by Prague-based Median, more than the 22 percent the party got in the 2010 election.

The Communists were next with 18.5 percent in the survey of 1,377 people. TOP09 had 15 percent support, while Necas’s Civic Democrats had 13 percent, according to the poll, which was published July 24 and had a 1 percentage point margin of error for smaller parties and 3 percentage points for larger parties.

‘Only Solution’

“Early elections are the only possible solution for the political crisis,” Social Democrat Chairman Bohuslav Sobotka told reporters in parliament today. “There is no alternative. Failing to dissolve the chamber would risk political chaos.”

The previous government focused on narrowing the budget gap by trimming investments and raising taxes. While undershooting 2011 and 2012 deficit targets helped cut borrowing costs, it frustrated the public and curbed private consumption, worsening the economic contraction, the central bank has said.

The Czech economy exited its 1 1/2-year recession in the second quarter, when gross domestic product advanced 0.7 percent from the previous three months, preliminary data released last week showed. GDP will drop 0.4 percent this year, the International Monetary Fund predicts.

The Social Democrats want to support the economy with more state spending, while keeping the fiscal shortfall below the EU’s 3 percent of GDP limit, shadow Finance Minister Jan Mladek said Aug. 15. The party plans to boost state revenue by increasing taxes for higher earners and some businesses, including financial, energy and telecommunications companies.

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