CZECH GOVERNMENT CRISIS: PULLING BACK FROM THE

C O N F I D E N T I A L SECTION 01 OF 03 PRAGUE 000547

SIPDIS

E.O. 12958: DECL: 04/15/2015
TAGS: PGOV PREL EZ
SUBJECT: CZECH GOVERNMENT CRISIS: PULLING BACK FROM THE
BRINK OF RESOLUTION - MORE UNCERTAINTY AND SPECULATION AHEAD

Classified By: Deputy Political Counselor Mark Canning for reasons 1.4
b+d


1. (C) SUMMARY The agreement on a new version of the old
government, reached by the chairmen and vice-chairmen of the
three coalition parties after 8 hours of negotiations late on
the night of April 13, was rejected 15 hours later by the
leadership of CSSD, the main party in the coalition. Jan
Kohout, who had been expected to lead the new government,
has returned to Brussels and his position as Czech Ambassador
to the EU. Two more ministers have resigned, bringing to
seven the number of cabinet members waiting to have their
resignations accepted by the president. Coalition junior
partner Freedom Union says the coalition is dead. Some in
CSSD say they expect PM Gross to try to form a minority
government, although this is sure to further divide the
party. President Klaus insists the only options now are
patching up the agreement reached on April 13 or a caretaker
government leading to early elections. We believe the latter
to be the most likely scenario, although the limits imposed
by the Constitution guarantee that the crisis will continue
for some time as the President works to bring this about.
End Summary.

REPORTS OF MY BIRTH WERE PREMATURE


2. (SBU) The chairmen and vice chairmen of the three parties
in the current Czech governing coalition met the evening of
April 13 and, after more than 8 hours of difficult talks,
seemed to have reached agreement on a new government that
would replace the fractured coalition and bring an end to
months of political uncertainty. Freedom Union vice chair,
Frantisek Pelc, who participated in the talks, said in the
end he was not sure exactly what the leaders had agreed to.
In the week preceding the talks, PM Gross had proposed a
non-political government, bringing back together the three
parties and preserving their one-vote majority in Parliament,
but without the leaders of any of the parties in the cabinet
(himself included). So it was a surprise when Czechs woke up
the morning of the April 14 to discover that the coalition
partners had apparently agreed to form a new government that
contained many of the faces of the old government, including
the chairman and vice chairman of Freedom Union, two vice
chairmen of the Christian Democrats, and two vicee chairmen
of CSSD.


3. (SBU) On the afternoon of the 14th, PM Gross presented
the agreement to the President, who welcomed the news that
the crisis might be coming to an end. That evening the
broader leadership of each of the three parties met to give
their approval to the deal. The coalition's two junior
parties approved. But the CSSD leadership rejected it. In a
strange turn of events, Gross himself led the CSSD vote
against the deal that he had brokered the night before,
claiming that the Christian Democrats had demanded too much
-- including keeping their two vice chairmen in the
government and taking over the important Ministries of
Agriculture and Industry. Later on April 14 the remaining
two Freedom Union ministers -- Nemec (Justice) and Kuehnl
(Defense) -- resigned.


4. (C) CSSD surprise rejection of the deal -- which was
designed to keep the current coalition partners in power
until elections next summer, protecting the jobs of thousands
of elected and unelected party officials -- generated
surprise and rekindled animosity towards Gross that help
spark the crisis in February. Although the Christian
Democrats (KDU-CSL) initially reacted sharply to the CSSD
decision, on April 15 KDU-CSL Chairman Kalousek offered an
olive branch and announced there was still a small window
open during which CSSD could reconsider and accept the April
13 agreement. When asked about the plans of the Freedom
Union, Vice Chair Pelc said the party still felt that the
agreement was an acceptable end to the government crisis.
Pelc said the party had no plans to discuss the matter
internally or negotiate with coalition partners. Pelc said
he felt it was "unbelievable" that Gross had signaled
acceptance of the agreement, presented the agreement to the
president, and then attacked the agreement within his own
party. Pelc said his party was stunned. He said they take it
as a very bad sign for future cooperation.

CSSD REGULARS IN NO MOOD TO APPEASE CHRISTIAN DEMOCRATS


5. (C) Martin Turek, CSSD member and Deputy Chief of the
PM's Office, told us Gross had reservations about the
agreement even during the negotiations. Turek said party
members felt the agreement was too advantageous for Kalousek
and the Christian Democrats. He said Kalousek and fellow
Christian Democrat Jan Kasal could hardly contain their glee
after the agreement was supposedly reached. Turek said that
in the eyes of the CSSD leadership, Kalousek got everything
he wanted: Gross's resignation, the removal of FM Svoboda, a
rival within the Christian Democrat party, and he placed
three of his highest level subordinates in the most
remunerative ministries. Turek complained that the Christian
Democrats had milked all they could out of the Ministry of
the Environment under the old coalition, and were now being
given, as part of the new coalition, the Ministry of
Agriculture, believed to be the recipient of more than 2
billion dollars a year in government subsidies and EU funds.
Turek also argued that it was shameful for Environment
Minister Ambrozek, formerly charged with protection of the
land, to suddenly switch to the Ministry of Agriculture,
where he would be charged with commercial exploitation of the
land. Finally, Turek expressed indignation at what he and
other CSSD members perceive as a double standard on ethics.
He argued that Gross has had to resign because of the
inexplicable financing of his own apartment, but Kalousek
hasn't been held accountable for the lack of clarity in his
housing.


6. (C) Both Turek and Pelc pointed to divisions within CSSD
itself concerning the agreement. Pelc said he could see
during the negotiations that Gross had a different opinion
than CSSD Vice Chairman Sobotka, the Finance Minister, or
Lubomir Zaoralek, the Speaker of the Parliament. News
reports confirm that Sobotka and Zaoralek had been willing to
meet the demands of the Christian Democrats. These same
reports hint that Zaoralek might be losing ground in his
party for this, and for earlier public acknowledgment that
early elections would be one way out of the crisis. Pelc
also said it was clear that PM designate Jan Kohout had a
very different idea of what the new government should look
like than Gross did. Following the CSSD vote, Kohout flew
back to Brussels and his job as Czech Ambassador to the EU.


7. (C) Another CSSD leader, Jan Prokes, currently working
under the Christian Democrat Transport Minister Milan
Smonovsky, said his party could not accept the presence of
Christian Democrat ministers who had earlier resigned as part
of an attempt to bring the government down. Prokes said
the requirement that the new coalition be without coalition
leaders meant no party chairmen and no vice chairmen. He
said this would have applied to his own party as well,
meaning that Sobotka would have had to give up one of the two
positions, either CSSD vice chairman or Finance Minister, if
he wanted to remain in the government. The same would have
applied to vice chairman and Minister for regional
Development Jiri Paroubek.


8. (C) Prokes said the party's Central Executive Committee
would meet, possibly this weekend or next week, to decide
what to do next. Prokes thinks the committee will choose to
go it alone with a minority government. Both Turek and
Prokes said that such a government would not have to rely on
the communists for support, a move that would almost
certainly cause widespread public dissatisfaction, and more
departures from the cabinet. Both Turek and Prokes point
out that much of the CSSD program is incompatible with the
communist program.


9. (C) The constitution wouldn't require PM Gross to submit
his minority government to parliament for a vote of
confidence. As long as the PM stays in office, the
constitution recognizes changes in the cabinet, even the
entire cabinet, as personnel changes in the existing
government, and not a new government. Prokes thought Gross
would still submit the minority government to a confidence
vote, as he earlier pledged to do. It is difficult to
imagine how such a government would get through a vote of
confidence without the support of the Communist party.

KLAUS PROMISES TO PREVENT MINORITY GOVERNMENT


10. (SBU) President Klaus made a public statement April 15
saying he thought the only two ways out of the impasse were
to patch up this week's agreement (keep the same three
parties running the government),or to have an interim
government that prepares for early elections. He insisted
there was no "third way" and that he would not permit the
formation of a minority government. He called on the three
party leaders to formally tell him whether or not they
consider the April 13 agreement to have any future. If the
answer is no, then he will start negotiations with the
parties on formation of an interim government and approval
for early elections.


11. (C) However Klaus's authority in this regard is limited.
Klaus cannot dissolve parliament nor can he force Gross to
agree to early elections. Parliament needs to approve a bill
shortening their term. Seven of Gross's 18 cabinet ministers
have resigned, though Klaus has not accepted any of the
resignations. The ministers are all continuing in their
functions, though to a much more limited degree. According
to the constitution, Klaus must accept the resignations;
however, no deadlines are imposed. If Klaus were to accept
the resignations now, Gross would likely nominate CSSD
members or nonpartisans to fill the spots. Thus Klaus's
extra-constitutional decision to not act on the resignations
is his method of preventing creation of a minority government
and keeping pressure on Gross to negotiate on his terms. If
three more ministers resign (and more than three have
indicated they would resign if a minority goverment dependent
on Communist support became a reality),then these ten
ministers could approve a pending cabinet motion for the
government as a whole to resign, freeing Klaus to appoint a
new government.


12. (C) COMMENT. Gross has clearly lost control of the
situation, angering some of his most loyal supporters in the
party (Sobotka and Zaoralek),angering the President (who had
publicly endorsed the April 13 deal just hours before CSSD
killed it),and rekindling the animosity with Kalousek. His
days as head of government are numbered. Of the three
options on the table -- minority CSSD government,
resurrecting the three-party coalition on the basis of the
April 13 agreement, or caretaker government leading to early
elections -- the latter is now the most likely. The idea of
a minority government with Communist support will generate
enough resignations to bring down the government; we are also
increasingly hearing it will trigger public protests. There
is always a chance that the instinct of self-preservation
will force the CSSD to reconsider the April 13 agreement, but
Gross may already have divided the party to such an extent
that they will never be able to agree on a rational division
of seats (the left-wing of the party appeared to have almost
no positions of power under the April 13 agreement).
Bringing about early elections will not be easy, which is why
the crisis is likely to continue for some time. But Klaus
has demonstrated that he is already willing to stretch the
limits of his constitutional authority to deal with the
situation. We certainly expect that any interim government
under this scenario would be heavily influenced by the
President (which should, on balance, be a positive in terms
of foreign policy and transatlantic relations).
HILLAS