CZECH GOVERNMENT CRISIS MOSTLY RESOLVED AS PM

C O N F I D E N T I A L PRAGUE 000603

SIPDIS

E.O. 12958: DECL: 04/26/2015
TAGS: PGOV PREL EZ
SUBJECT: CZECH GOVERNMENT CRISIS MOSTLY RESOLVED AS PM
PAROUBEK TAKES OFFICE

REF: PRAGUE 572

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


1. (SBU) SUMMARY The crisis that began 14 weeks ago with an
inquiry into the funds used by Czech Prime Minister Gross to
purchase a luxury flat is nearly at an end. Gross has
resigned and Jiri Paroubek, formerly his Minister for
Regional Development, has replaced him at the head of a
three-party coalition with a single-vote majority in
Parliament. The only remaining hurdle is a vote of
confidence, which the new government must face sometime
within the next 30 days. The Paroubek government consists
largely of ministers who served Gross, including the Foreign
and Defense Ministers. However, after months of infighting,
and facing elections next year, the new government will be
even weaker than the last. END SUMMARY


2. (U) Czech PM Stanislav Gross resigned on Monday, April 25,
following the approval of the deal reached last week (reftel)
by his party over the weekend. Gross had risen to the post
after his predecessor and party colleague, now EU
Commissioner Vladimir Spidla, lost the support of the party
and resigned in June, 2004. Gross became the youngest PM in
Europe and initially drew the highest popularity ratings of
any politician in the country. During his 10 months in
office, Gross saw his popularity ratings fall from 80% to
18%. Gross will remain as head of the coalition's main
party, the CSSD.


3. (C) The new PM, Jiri Paroubek, a CSSD Vice Chairman and
Gross ally, spent much of his career in politics at Prague's
city hall. He has had relatively little foreign policy
experience, few foreign trips, and almost no contact with
other heads of government. It is too early to say what the
relationship between Gross and Paroubek will be or what role
Gross might play in foreign affairs. Foreign Minister
Svoboda, one of the three Christian Democrat ministers in the
old government, will keep his post in the new government, as
will Defense Minister Karel Kuehnl. However, some of CSSD's
more leftist members, including Jan Kavan and Vladimir
Lastuvka, have openly complained that CSSD should have more
influence in the Foreign Ministry, seeing Svoboda as too
pro-American. They have hinted about possible opposition to
the new coalition's vote of confidence. With a single-vote
majority in parliament, Paroubek will be forced to find some
way to satisfy their demands. We expect tough bargaining
over the coming days on the wording of new government's
program (which will be voted on as part of the vote of
confidence) -- during the transition from Spidla to Gross
last summer, Kavan and Lastuvka led a similar, but
unsuccessful, effort to downplay references to transatlantic
relations. In the coming days we intend to meet with Svoboda
and others to encourage the new government to maintain the
Czech Republic's traditional transatlantic policies in both
words and deeds.


4. (U) The three parties in the reconstituted coalition --
CSSD, the Christian Democrats and the Freedom Union -- have
agreed on priorities and rules for cooperation. The main
priority will be ratification of the European Constitution
(the CR is currently the only EU member that has not
determined the timing or means of ratification). The
coalition listed a number of other priorities, though it
isn't clear whether the remaining 14 months in office will
give the new government time to complete work on so many
potentially controversial bills. The other priorities are
lowering of taxes on middle and lower income groups,
preparation for pension reform - though not reform itself, a
budget for 2006, and laws on conflict of interest and
bankruptcy. The coalition also agreed that any initiatives
in certain areas, to include the budget, taxes and fees,
protection of property and foreign relations and defense,
must be approved by all three coalition members.
CABANISS