Why Czechs May Elect a Populist Billionaire, Too

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Like the U.S. in 2016, voters in the Czech Republic look set to hand power to a populist billionaire who attacks traditional parties and promises to run the state as one of his businesses. Andrej Babis is leading in opinion polls by a wide margin before Oct. 20-21 elections despite being a target of criminal investigation over alleged fraud -- he denies any wrongdoing -- as well as facing accusations of conflict of interests stemming from his chemical, food and media empire. Anti-establishment sentiment often spreads at times of economic malaise; Babis’s rise, more unusually, has come amid strong growth, record-low joblessness and robust wage increases under a coalition he’s shared with the Social Democrats.

Andrej Babis

Photographer: Martin Divisek/Bloomberg

1. What explains Babis’s rise?

The second-richest Czech, with a fortune estimated at $4 billion, Babis stormed the country’s politics four years ago, when his ANO party was the runner-up in legislative elections. (ANO means “yes” in Czech and is also an acronym for Action of Dissatisfied Citizens, the name of a Babis’s political movement.) ANO depicts traditional parties -- the ones that have held power since the fall of communism in 1989 -- as corrupt and incompetent. As finance minister from 2014 until his firing in May 2017, Babis got credit for overseeing an economic rally that helped cut the republic’s budget deficit - a badge of honor in a nation averse to debt and proud of its industrial heritage. One of his main initiatives forced businesses to link cash registers to the tax office via the internet, significantly improving tax compliance.

2. Won’t the criminal charges derail his campaign?

It doesn’t seem like it. Less than a month before elections, Czech police filed criminal charges against Babis over the alleged misuse of European Union funds at a recreation center belonging to his business empire. (At a 2016 parliamentary hearing, Babis said the center was owned by his children and brother-in-law when the application for EU funds was filed.) Babis calls the case politically motivated. The immediate fallout may be limited, since it’s highly unlikely that a court could issue a verdict before the election. Earlier this year, the Social Democrats teamed up with the opposition to tighten the law on conflicts of interest, forcing Babis to transfer his assets to two trust funds. The affair had a negligible impact on his popularity, and he’ll become the owner of the companies again if he leaves politics.

3. What kind of prime minister would he be?

As with any election, that depends on the strength of his prospective victory. All of ANO’s potential coalition partners reject Babis’s most radical idea -- changing the electoral system from proportional to majority representation, which would require amending the constitution. Babis also proposes reducing the number of ministers in the government and simplifying parliamentary procedures to expedite the adoption of laws. He promises to streamline state management by, for instance, centralizing purchases of office supplies and limiting the use of outside contractors. Babis says he wouldn’t meddle with the judiciary, distancing himself from the kind of measures seen in neighboring Poland that sparked a conflict with the EU over the rule of law.

4. Would he try to shake up the economy?

Almost certainly not. ANO isn’t seeking a stronger state role in the economy, other than Babis’ relatively modest aspiration to assert more direct control of the government-controlled utility, CEZ AS. As finance minister, Babis stopped the Social Democrats from slapping special levies on banks and utilities. The $193 billion economy is highly resilient to government change, following a decade in which the country had five different prime ministers. The biggest industries and banks are in foreign hands and the state has largely avoided any major interference.

5. How might ANO go about forming a government?

Even the most optimistic polls for Babis indicate he will probably need a ruling partner. With as many as eight parties possibly crossing the 5 percent election threshold, building a coalition may be difficult in a fragmented legislature. Babis has ruled out cooperation with extreme parties like the Communists and the anti-immigration Freedom and Direct Democracy. Apart from that, the tycoon has been vague about a possible coalition make-up, saying only that he sees some people inside other parties that he could work with. 

6. Could he try to maintain the current coalition?

That’s one of the options. Though he calls the Social Democrats lazy and fiscally irresponsible, Babis has stopped short of rejecting future cooperation with them. After all, their ruling alliance, despite many differences and constant bickering, became the first since 2002 to survive a full four-year term. Before Babis was formally charged with a crime, President Milos Zeman had said even that scenario wouldn’t stop him from asking the billionaire to form a government if ANO wins the elections. There’s always the chance that Babis’s opponents could team up in a broad coalition to prevent him from taking power. But polls indicate it might be impossible to form a government without ANO.

7. What are the biggest risks of a Babis-led government?

Babis lacks the traditional political philosophy or ideological anchor that defines mainstream parties. He has shown he can reverse a stance if he sees a political advantage. He initially spoke in favor of joining the euro area -- a move long supported by most Czech export-oriented companies -- but then became a vocal opponent of the currency switch, in line with the euroskeptic views of most Czechs. While he’s critical of the EU, and blames German leader Angela Merkel’s migrant policies for opening her nation’s borders to terrorists, he isn’t seeking a referendum on leaving the bloc. He says sanctions against Russia are ineffective and opposes closer economic integration within EU.

The Reference Shelf

  • A QuickTake explainer on conflicts inside the current ruling coalition.
  • Why EU-snubbing Czechs are backing a euroskeptic billionaire.
  • Cheap foreign labor became an issue late in the campaign.
  • How a Babis win would add to the populist rupture in European politics.
  • The IMF’s June 2017 report on the Czech Republic’s economic health.
  • An overview of the economic policies of the competing political parties, compiled by Czech 42FS brokerage.



— With assistance by Ladka Mortkowitz Bauerova

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