THE "NEW" CZECH GOVERNMENT: OLD WINE IN AN OLD

C O N F I D E N T I A L SECTION 01 OF 02 PRAGUE 000572

SIPDIS

E.O. 12958: DECL: 04/21/2015
TAGS: PGOV PREL EZ
SUBJECT: THE "NEW" CZECH GOVERNMENT: OLD WINE IN AN OLD
BOTTLE?

REF: PRAGUE 547

Classified By: Deputy Political Counselor Mark Canning for reasons 1.4(
b) and (d)


1. (SBU) SUMMARY. The three parties in the Czech ruling
coalition have agreed to end a three-month government crisis
and renew their cooperation. If the current proposal is
accepted this weekend by the central committee of the main
coalition party, the CSSD, PM Gross would resign next week
and be replaced by the current Minister for Regional
Development and CSSD Vice Chair, Jiri Paroubek. This new
government would retain the one-seat majority in Parliament
and be expected to serve until elections next summer.
Leaders have dropped any reference to non-political or pro-EU
governments: the current proposal is for a political
government with policy priorities and members nearly
identical to those of the Gross government. FM Svoboda and
DefMin Kuehnl would stay in their position, although DPM Jahn
may not. With tensions still high between and within the
coalition parties, a vote of confidence in a new government
is not assured. END SUMMARY


2. (SBU) If this deal is approved, it will mean continuity
in the areas most important to the US. Head of the CSSD
Parliamentary Club, Michal Kraus told the DCM Apr 20 that the
new government's policies will be exactly like those of the
old government. CSSD and Gross have, during the latter
stages of the crisis, been calling for a Pro-European
government that would have as its first priority a campaign
in favor of the EU constitution. Kraus said this idea has
been dropped. Kraus thought the Czechs, who are the only EU
member yet to fix a method for voting on the constitution,
would probably have a referendum on the issue, though he
couldn't say whether it would be before, or part of the
elections next June. According to Kraus, most of the issues
this government is likely to deal with, if it survives the
remaining 14 months before the next general election, will be
domestic one, including budget, taxes, and housing.


3. (C) The ministries of Defense and Foreign Affairs will
remain under current ministers Karel Kuehnl (Freedom Union)
and Cyril Svoboda (Christian Democrats). Svoboda, who has
confirmed his intention to stay, is very pro-American. For
example, during discussions on the arms embargo on China at
the recent EU foreign ministers Gymnich, Svoboda argued that
in light of the recently started political dialogue with the
US, it only made sense to wait and see how the talks go
before revisiting the issue. One area of concern is the
possible departure of Deputy Prime Minister Martin Jahn, who
had been pushing reform of the bankruptcy law and other
pro-business measures. Jahn's participation in the new
government was not clear as of Apr 20.


4. (SBU) The latest agreement reflects a significant amount
of chaos within CSSD. Throughout the crisis, CSSD and Gross
have made inconsistent statements, or made demands and then
dropped them. For example, two weeks ago Paroubek said, "I
want to say openly that the voters gave us a choice of two
mandates, either a majority government with the right of
center opposition party the ODS, or a minority government
supported by the communists. Any recreation of the 101 seat
coalition would be an attempt to revise the mandate of the
voters." Now Paroubek is planning to lead that recreated
101-seat coalition. Another example: for nearly two weeks
Gross has been proposing a semitechnical government that
contained no party leaders. The proposed government will now
be led by CSSD Vice Chair Paroubek, and contain CSSD Vice
Chair Sobotka as Finance Minister, Freedom Union Chair Nemec
as Justice Minister, and Vice Chair Kuhnl at Defense. CSSD
has also been saying all along that they would not accept
anyone who broke up the old coalition, referring to the
Christian Democratic ministers Ambrozek, Svoboda, and
Simonovsky, who had resigned. Yet all three would keep their
places in the proposed new government.


5. (SBU) The agreement is seen as a victory for the Christian
Democrats. From the start of this crisis in January, the
goal of Christian Democratic leader Miroslav Kalousek has
been to get rid of Gross, and that is the only significant
change that this new government would bring. The only
concession the Christian Democrats appear to have made in
order to close the latest deal is that its three ministers
will give up their positions as party vice chairs.


6. (SBU) The agreement is also good news for Freedom Union.
The party is only polling two percent, well below the five
percent threshold for entry into parliament. Early elections
would have meant an end to the party's role in government.
Now it looks as though they'll not only keep their old posts,
both government and party, but they might pick up extra
responsibilities if Justice Minister Nemec inherits the
legislative council post of Minister Without Portfolio Bures,
who will not be replaced.


7. (SBU) PM Gross informed President Klaus about the new
agreement by telephone on Apr 19. Klaus has not yet issued a
public statement on the deal, perhaps a reaction to the early
public endorsement he gave to the deal reached last week that
subsequently collapsed. But the latest deal meets the
minimum requirements Klaus had earlier established, namely a
coalition with a majority in Parliament. Once each of the
three coalition parties has formally approved the deal --
with the key being the CSSD on Apr 23 -- Gross will formally
submit the resignation of the cabinet to the President.
Klaus had previously stated that he would turn first to the
CSSD to lead a new government. The Paroubek government --
which would be the third CSSD-led, three-party coalition
government since elections in 2002 -- would require a vote of
confidence. Given the slim majority and the acrimony of
recent months, there is no guarantee that this would pass.


8. (U) Paroubek (53) has a business background. He was never
a member of the Communist Party. He became a CSSD member in
1990, and since 1991 was involved in Prague city government.
From 1998-2004 he was Vice Mayor of Prague in charge of
finances, until becoming Minister of Housing and Regional
Development when Gross took office last August. He was
elected CSSD Vice Chairman at the party congress in March.


9. (C) As the man in charge of finances for many years in a
city that tolerates corruption, Paroubek has a reputation as
a deal-maker, not a man of principle. In the early 90s he
was in the CSSD right wing. Last week he said publicly that
he could live with a minority government supported by the
communists. He is very close to Gross, who will retain his
position as CSSD Chairman. Kraus told the Embassy that
Paroubek was chosen over Finance Minister Sobotka because
Paroubek was the kind of fighter who could lead the party to
the next elections.


10. (C) COMMENT. Overall, this latest deal represents a good
outcome for the US, as some of the most important ministers
would keep their positions, although Jahn's departure would
be a loss. But the fact that the crisis has gone on for so
long reflects some of the problems in Czech politics: weak
ties between constituents and parties, journalists who print
unsubstantiated accounts, along with a tendency to fight
political battles in public, rather than behind closed doors,
and the general unsettled nature of the political spectrum.
Public disgust has been growing as the crisis has continued,
and the current solution -- essentially the status quo --
will leave many scratching their heads. Kraus told the
Embassy that three months of political tension have left
relations between the three parties "frozen, the worst in
years." The fragile coalition, with just a single seat
majority in parliament, is going to have to first win a vote
of confidence, then pass difficult pieces of legislation,
such as the 2006 budget. Assuming the latest deal gets over
the immediate hurdle of winning CSSD approval, and the
current crisis actually comes to an end, we certainly should
not expect smooth sailing between now and next summer's
election.
HILLAS