CZECH PRESIDENT REJECTS PROPOSED GOVERNMENT,

UNCLAS SECTION 01 OF 02 PRAGUE 001548

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STATE FOR EUR/NCE

E.O. 12958: N/A
TAGS: PGOV PREL EZ
SUBJECT: CZECH PRESIDENT REJECTS PROPOSED GOVERNMENT,
HIGHLIGHTING TENSIONS WITHIN ODS

REF: PRAGUE 737


1. (SBU) SUMMARY: Czech President Vaclav Klaus has rejected
the government put forward by Prime Minister Mirek Topolanek
(ODS),prolonging at least temporarily the half-year search
for a new government. Klaus's decision is only a delaying
measure as under the Constitution he has no choice but to
eventually accept the Prime Minister's proposal, but it will
at least force Topolanek to make some changes to the
hastily-conceived three-party coalition government. The
latest developments highlight personal and factional
differences within ODS, the party founded by President Klaus,
and there is no guarantee that Topolanek will not, in the
end, be replaced as party leader. But for now, the outgoing
Topolanek government remains in charge and the holiday season
in Prague will be marked by behind-the-scene maneuvering,
with a revised version of the three-party coalition likely to
be presented to the President early in the new year. END
SUMMARY.


2. (U) Recent weeks have witnessed a flurry of activity as
Czech political leaders struggled to put together the second
coalition since the deadlocked June 2-3 elections. Outgoing
PM Topolanek, whose minority ODS government was installed in
early September and lost a vote of confidence one month
later, was given the mandate to form a new government in
early November. Serious work on this did not begin until
after an ODS party congress in November and the Christian
Democrats' (KDU-CSL) selection of new leadership earlier this
month. A grand/rainbow coalition between ODS, the opposition
Social Democrats (CSSD) and the KDU-CSL looked likely to move
forward until ODS regional representatives, in a surprise
move last week, voiced last-minute objections. Topolanek
then moved quickly to put together a coalition with KDU-CSL
and the Greens -- the same coalition he had assembled back in
June that he had to abandon when it became clear that it
would not win a vote of confidence with only 100 votes in the
200-seat chamber. The difference between now and the summer
is that two CSSD deputies have since left the party, and one
announced he would support the center-right coalition.


3. (SBU) On December 21, as he promised one week earlier,
Topolanek presented the list of ministers in his three-party
coalition to President Klaus. He also presented a government
program that drew largely from the agreement concluded in
June (reftel),but gave increased importance in two areas:
the urgency for economic reform, and a basket of policies
important to the Greens, who over the past six months have
improved markedly in opinion polls. With even CSSD Chairman
Paroubek admitting that he expected his party to go into
opposition (i.e., that the vote of confidence for this
government would succeed),most observers expected the
President to accept the offer, despite his known preference
for a grand coalition. But in a surprise move, President
Klaus rejected the list. He cited his earlier statements that
he would not appoint a government that relied on the votes of
one or two renegades. Klaus instructed Topolanek to go back
to his partners and other parties and try to put together a
government that would be more stable, more likely to have the
support needed to push through controversial reforms, and
likely to last to the end of the electoral term.


4. (U) Klaus's rejection of the proposed cabinet raises a
number of questions, not least of which is the constitutional
issue of whether the President has the legal authority to
reject ministers put forward by the Prime Minister. The Czech
Constitution (Article 68) only says that the President
appoints the ministers at the recommendation of the Prime
Minister, but is generally interpreted as allowing the
President to decide how expeditiously he carries out this
task. This debate has been held on several occasions in the
past, when both President Havel and Klaus objected to
individual cabinet appointees, but eventually made the
appointments when they could not convince the Prime Minister
to change his mind. Justice Vojtech Cepl, one of the
co-authors of the Constitution, reacted to Klaus's decision
by saying, "the gentleman at the Castle (i.e. Klaus) should
read the Constitution." The Constitution allows for three
unsuccessful attempts at forming a government, i.e., a failed
vote of confidence, before early elections are called.
Klaus's decision is not the end of one attempt, but merely
prolongs the second attempt that began when he re-named
Topolanek as Prime Minister last month.


5. (SBU) In his announcement Klaus made a point of singling
out one of the proposed ministers for criticism. He said
that the proposed Foreign Minister, Senator Karel

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Schwarzenberg, a member of ODA -- a nearly defunct party that
split with ODS in the 1990s because of differences with
then-ODS Chairman Klaus -- who was nominated by the Greens,
was inappropriate given the "current fragile relations with
Austria." Schwarzenberg lived in Austria for many years
prior to 1989. But it is more likely that Klaus's real beef
is the fact that Senator Schwarzenberg was Chief of Staff to
President Havel and Klaus has never liked Havel or those
close to him. Schwarzenberg was a surprise choice, whose name
only emerged as a possible candidate hours before Topolanek
presented his list. After his meeting with Klaus Topolanek
defended Schwarzenberg, saying he respected the Greens'
choice.


6. (SBU) Klaus wasn't the only ODS insider (he remains
honorary chairman of the party) to find fault with
Topolanek's cabinet. ODS controls 13 of the country's 14
governorships. Those regional leaders have few ways of
raising funds themselves and have to depend on Prague and
Brussels for most of their revenues. Therefore, for the
governors, the two most important ministries are the Ministry
of Finance and the Ministry for Regional Development. In the
cabinet rejected by Klaus, those two ministries went to the
Christian Democrats even though the party is consistently
coming in fifth of the five parliamentary parties in
popularity polls. The regional leaders, as well as Prague
Mayor Pavel Bem (ODS),who is much closer to Klaus than to
Topolanek, reacted to the cabinet list with surprise and
dismay, reflecting either a failure of Topolanek to
adequately consult in-house, or a maneuvering for position
within the party, or both.


7. (SBU) In general, Topolanek's proposed cabinet would have
been a government that supported reform and strong
transatlantic ties. Current Foreign Minister Alexandr Vondra
was to be elevated to Deputy Prime Minister, with
responsibility for European Affairs -- a suitably vague
position from which he could have exerted considerable
influence over relatively weak Foreign and Defense (Vlasta
Parkanova of KDU-CSL) Ministers. Seven of the ministers would
have been ODS members serving in the current Topolanek
government, most of them serving in key economic ministries.
The only notable departure was ODS Finance Minister Tlusty,
who has never been close to Topolanek and who damaged his
position by refusing to vote in favor of the budget this
month. The cabinet would have included other friends of the
U.S. such as former Foreign Minister Cyril Svoboda (KDU-CSL),
who would have become Minister of Culture, and former Consul
General at the Czech Mission in New York, Petr Gandalovic
(ODS),who would have become Agricultural Minister. The
government's proposed agenda included a number of reforms,
including lowering taxes on personal and corporate income to
a flat rate between 17 and 19 percent, raising the retirement
age, introducing patient co-payment for medical services, and
eliminating some social benefits.


8. (SBU) COMMENT. For now, the outgoing Topolanek government
remains in charge. The cabinet that was rejected on the
afternoon of December 21 was still being cobbled together
just hours beforehand, with perhaps insufficient consultation
within ODS itself, and certainly with the President.
Topolanek has said he intends to stick with his three-party
cabinet, although insiders tell us there will certainly be
some changes considered during the pause provided by the
holidays. We do not expect any significant announcements,
nor a return trip to the Castle, until January. What is
unknown is how significant the power struggle within ODS will
be over the coming weeks. Topolanek has upset many
influential figures and groups within the party, although it
is far from clear that a tipping point has been reached. The
debate within ODS, rather than any interparty talks, will
shape what sort of coalition emerges in the new year. END
COMMENT.
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