WHAT IF THERE IS A MINORITY CSSD GOVERNMENT?

C O N F I D E N T I A L SECTION 01 OF 03 PRAGUE 000348

SIPDIS

E.O. 12958: DECL: 03/10/2015
TAGS: PGOV PREL EZ
SUBJECT: WHAT IF THERE IS A MINORITY CSSD GOVERNMENT?

Classified By: DCM Kenneth Hillas for reasons 1.4 B/D


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A "temporary Cease-fire"
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1. (C) On March 6, PM Stanislav Gross won a decisive vote of
confidence from the Social Democrats Central Committee, but
the ongoing crisis in the ruling three party coalition
government has not ended and is likely to erupt anew after
the Easter Congress of the Social Democrats (CSSD).
Christian Democratic (KDU-CSL) party leader Miroslav Kalousek
has made clear that if PM Gross wins re-election as CSSD
Chair at the Congress, the Christian Democrats will renew
their call for Gross' resignation. A "temporary cease-fire,"
as Kalousek has named it, will hold until then. Kalousek's
uncompromising approach over the last several weeks - and his
promise of more - has surprised many Czechs, who expected
Kalousek to use Gross' public "apology" for the scandal
involving his wife's business affairs and his own
contradictory explanations as opportunity to resolve the
crisis. Gross is clearly interested to reach an accord with
Kalousek, whose own past financial activities and reputation
do not mark him as the most likely person to point an
accusing finger over impropriety. For his part, however,
Kalousek has shown a single-minded determination to bring
down Gross - a stance whose toughness has surprised even some
KDU-CSL leaders. Kalousek's calculations appear to lie in a
determination that it is better to be out of government for
several months than to face the next parliamentary elections
-- whether in summer 2006 or earlier -- as an opposition
party. He may have reached an understanding with ODS leader
Miroslav Topolanek about KDU's role in the next government,
which is widely expected to be led by the ODS. He made also
have decided that some planned privatizations, such as Cesky
Telecom, could preferably be delayed for at least another
year. Within the month, it is possible that either Gross
will throw the KDU-CSL out of the ruling coalition, or
Kalousek will take them out on his own.

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Pressure to Reach a Resolution
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2. (C) In any event, President Klaus' public remarks that
the government crisis cannot continue to drag on adds
pressure on Gross, and to a lesser extend Kalousek, to find a
resolution through a vote of confidence. Whether the
coalition could succeed depends on Kalousek and the Freedom
Union, some of whom have also started to clamor for
abandonment of the coalition. The ODS reportedly will hold
off on a no-confidence motion until after the CSSD Congress.
According to sources in the PM's office, Gross has come to
the conclusion that he cannot maintain the coalition. Gross
has been exploring with Klaus and the ODS some kind of grand
bargain involving a CSSD minority government, early elections
and the timing of a referendum on the EU Constitutional
Treaty. There are indications that it will be hard to
conclude and implement such a big compromise. The
alternative is a minority CSSD Government with the external
support of the communist party (KSCM).

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Are the Communists Still to be Excluded?
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3. (C) Gross has said that he would refuse to lead a
government that depends on KSCM support. For more than 10
years, this has been a bedrock CSSD principle, adopted at the
famous CSSD Bohumin Congress. The "Bohumin Accord" in effect
walls off nearly a quarter of the parliamentary votes (41 of
200) from any effort to form a government based on a
parliamentary majority, a serious complication for any
political leader but one in the immediate post-Velvet
Revoltuion period that enjoyed broad consensus. An
unwillingness to cooperate with the communists in government
is one reason why the CSSD and the right-wing ODS entered
into the infamous "oppposition agreement" of 1998-2002. The
exclusion of the communists from the levers of power at the
national level was a natural position of the centrist and
right-wing parties as well.

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Inroads in Recent Years
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4. (C) However, Klaus' 2003 election as President with
communist votes in parliament underscored the progress the
KSCM has made in getting back into the political game.
Unlike former President Havel, Klaus has formally consulted
with KSCM Chairman Grebenicek, giving him a more equal status
than the KSCM previously enjoyed. As a result, for the first
time it is possibl to imagine a minority government kept in
office by the KSCM. Althouugh the communists have said they
are prepared to support to a minority Gross Government should
the KDU-CSL and Freedom Union withdraw their ministers, Gross
has said he would resign rather than depend on the
communists. If faced with the stark choice of resign or
carry on with quiet communist support, it is difficult to
imagine Gross throwing in the towel. If he cannot strikke a
bargain with the ODS to allow a minority government a
shortened term, reliance on the KSCM is the other alternative
to Gross' resignation, which would bring down the Government.


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Communist Influence on a Minority Government
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5. (C) The USG needs to consider the implications of a CSSD
minority government for U.S.-Czech relations. This message
shares some assessments and recommendations for Washington to
consider. External communist support of a CSSD government
led by Gross - or almost any senior CSSD figure - need not
represent a serious setback in our ongoing cooperation in the
War on Terrorism, including current deployment commitments in
Iraq and Afghanistan, nor in our bilateral relations on
defense and foreign policy. A minority government would, of
course, face increased pressure on military/intelligence
resources during the autumn budget deliberations, adding to
pressures for cuts in expenditures, but those were expected
regardless of the outcome of the current crisisre. It would
be important at an early stage for the USG to signal to Gross
that it is prepared to continue to work with a minority CSSD
government in maintaining our current levels of cooperation,
while making clear our priorities. If Deputy Secretary
Zoellick were to visit Prague this spring, he could expect
his Czech interlocutors to convey a message of reassurance
abouut continuity in Czech foreign and defense policies.

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Protecting Priority Interests
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6. (C) There would, of course, be a price to pay for outside
communist support of a minority government, but the KSCM's
priorities are not likely to lie in the exercise of influence
on foreign, security and defense policies. Rather, the KSCM
can be expected to look to satisfy its party base in the
run-up to the 2006 general elections. Housing, eduction,
labor and social affairs are the areas on which the
communists would most likely focus. None of these are at the
core of US-Czech relations. Communist influence in these
areas would be noxious but tolerable in the short term, if
the Gross Government were prepared to make a commitment to
wall off national security affairs from communist influence.

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Staying in Tune with Key Allies
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7. (C) It will be key for the US response to a CSSD minority
government, should one emerge, not to diverge dramatically
from that of our key allies, especially the UK, which has
been a touchstone for the Czechs on ESDP. British diplomacy,
which is also wrestling with the "what if" question of a
Gross minority government, can be expected to keep its
relations on an even keel if the Czechs ensure continuity on
foreign and defense policy. If the US and UK send a
consistent message to Gross in such a situation, this would
have a multiplier effect and strengthen the chances that
communist influence is contained.


8. (C) It is time to begin to think about such questions
should not be taken as a sign that a minority government with
communist external support is in the cards. Indeed, Klaus is
not likely to fancy the idea of a minority government,
especially one kept in office by the KSCM, one of the few
unreconstructed hard-line communist parties in Central
Europe. In his public remarks, Klaus has stressed the need
for a solid and enduring government majority. But such a
scenario is no longer inconceivable, and Gross' choices may
be very constrained if Kalousek makes good on his promise to
renew his demand for Gross' resignation after the end of the
month.
CABANISS