CZECH REPUBLIC: IMPLICATIONS OF NEW GOVERNMENT FOR

S E C R E T SECTION 01 OF 03 PRAGUE 000737

SIPDIS

NOFORN
SIPDIS

STATE FOR EUR/NCE, EUR/FO, P STAFF

E.O. 12958: DECL: 06/27/2016
TAGS: PGOV PREL EZ
SUBJECT: CZECH REPUBLIC: IMPLICATIONS OF NEW GOVERNMENT FOR
U.S. INTERESTS

REF: PRAGUE 719

Classified By: Acting DCM Michael Dodman for reasons 1.4 B & D


1. (C/NF) SUMMARY AND COMMENT: The center-right coalition
that will take office perhaps as early as next week, pending
resolution of Lower House leadership negotiations, will be
generally positive for U.S. interests in the Czech Republic.
Although the date of a vote of confidence in the Topolanek
government is unknown, and there is no assurance the
coalition will win this vote, the new coalition is expected
to serve for at least several months. Particularly on
foreign policy, the new team promises continuity in our
current positive relationship. Foreign Minister-designate
Vondra is a close friend of the U.S., but we should expect
that, at least publicly, he will make efforts to paint
himself as tough on the U.S. to counter any suspicion that he
is a "trojan horse." He is likely to take a particularly
tough line on visas. While the designated Defense Minister
does not have particularly strong credentials for the job,
her party has been generally supportive of the U.S. on
security issues, and we expect no change in policy. However,
Christian Democrats in the MOD have been the source of
repeated concerns on procurement, and we can expect a tough
battle if any major procurements come up under this team. On
economic policy and investment climate, the new government
will be overall an improvement. But here in particular
results will depend on how successful Topolanek will be in
keeping his coalition together and working with the
opposition. Any decisions requiring parliamentary vote will
be difficult. End Summary.


2. (SBU) STILL A LONG ROAD AHEAD: The coalition agreed to
June 26 by the center-right ODS, Christian Democrats
(KDU-CSL) and Greens (reftel) will not take office
immediately. PM Paroubek made a surprising announcement on
June 28 that he would resign on July 3. It is unclear what
impact Paroubek's announcement will have on the election of
the Speaker of the Chamber of Deputies, which is currently
being negotiated between ODS and Paroubek's CSSD. Agreement
on the Speaker is a prerequisite for any government
resignation to take effect and the President to appoint a new
team (i.e., even if Paroubek does resign on Monday, the
President still wouldn't be able to appoint the new
government without decision on a Speaker). Agreement on the
Speaker could come as early as July 29, but this is more
likely to be delayed for further negotiations. Once the
President actually appoints Topolanek and team (Klaus has
already stated that he approves of the coalition members),
they immediately take office and a 30-day clock starts
ticking, during which the new government must "ask for" a
vote of confidence -- the Constitution does not state when
the vote must actually take place. If that vote fails, as
many observers expect, Topolanek and team remain in office
while a second coalition is negotiated, which could take
months. We therefore expect to be working with a Topolanek
government from July and into the fall, if not longer.


3. (C/NF) KEY PERSONALITIES AND CONTINUITY IN FOREIGN POLICY:
Whether this new coalition government proves to be just a
"summer government" or successfully secures a vote of
confidence, the key personalities affecting Czech foreign
policy and relations with the U.S. include proposed Foreign
Minister Aleksandr (Sasha) Vondra (independent but ODS
nominated) and proposed EU Affairs Minister Petr Gandalovic
(ODS). Both are pro-U.S., with Vondra having served as
Ambassador in Washington and Gandalovic as Czech CG in New
York. Both have supported outgoing FM Svoboda's policies,
including democracy promotion. Both are also close friends
with current Czech Ambassador in Washington Petr Kolar. At
his farewell to the diplomatic corps earlier this week,
Svoboda stressed continuity in foreign policy, and all
observers concur that no significant changes are likely. One
important dynamic will be the relationship between Vondra and
Gandalovic, since the latter's position is new and will mean
the removal of EU coordination functions from the MFA. While
the Ministry will retain the lead on all CFSP and ESDP
issues, it is possible that rivalry between the two will have
an impact on Czech support for transatlantic positions within
the EU. However, given the personal friendship between the
two, their mutual pro-U.S. orientation, and Vondra's more
extensive history in the MFA and on the international stage,
we do not anticipate problems.


4. (SBU) VISAS: Vondra has long been a critic of U.S. visa
policy and our inability to find a way to bring the Czech
Republic and other Central European allies into the visa

PRAGUE 00000737 002 OF 003


waiver program. In this area in particular we expect him to
be quite outspoken. In part this will be a way for him to
prove to detractors that he is not an American "trojan
horse."


5. (SBU) DEMOCRACY PROMOTION: Czech leadership in democracy
promotion and transformational diplomacy around the world,
including in Cuba, Iraq, Burma and the Balkans, will continue
full force. As a former dissident and human rights activist,
Vondra is expected to carry on the work of current FM Svoboda
in maintaining the Czech Republic's leadership position
within the EU and even outside the EU on these areas.
Therefore, this is a logical area where the USG and the GOCR
will want to continue to coordinate our efforts.


6. (C/NF) SECURITY POLICY: Designated Defense Minister
Vlasta Parkanova (KDU-CSL) was a surprise choice. While she
has served as Chair of the Constitutional and Legal Affairs
Committee (2002-2006) and as Deputy Chair of the Defense and
Security Committee (1998-1002),she is not known as an expert
on defense policy. She served previously as Justice
Minister. She is a relative newcomer to KDU-CSL, having
joined the party only in 2001. The embassy has not had close
contacts with her in recent years, and she is not remembered
as having taken strong stands (either for or against) on
issues of importance to the U.S. Despite a strong
endorsement from outgoing DefMin Kuehnl, most observers
believe Parkanova will be a relatively weak minister with
KDU-CSL Chairman Miroslav Kalousek (a former Deputy DefMin)
calling the shots -- although Kalousek himself will be busy
with his position as Deputy PM and Minister in charge of the
combined Agriculture and Regional Development Ministries
(i.e., in charge of the bulk of EU funding). In terms of
policy this is not a problem (with the possible exception of
Missile Defense, see below) as KDU-CSL has been a strong
supporter of NATO and transatlantic relations, including
deployments in support of the GWOT. Procurement is a
potential problem, as KDU-CSL appointees in the MOD have a
reputation for being non-transparent and often not supportive
of American firms, although we have won many contracts with
these appointees in place.


7. (S/NF) MISSILE DEFENSE (MD): With the elections now over,
Czech politicians have recently begun to take public
positions on the possible basing of a U.S. MD site in the
Czech Republic. President Klaus appears to be skeptical, as
does outgoing PM Jiri Paroubek. However, Topolanek is
generally in favor of hosting such a site, and his
ministerial nominees include several supporters of the MD
idea. Several members of coalition partner Christian
Democrats and the Greens are skeptical. MOD officials briefed
embassy officers June 28 that they believe authorization will
soon be forthcoming for a visit of a U.S. technical team to
conduct surveys of Czech candidate sites for missile defense.
They indicated that they had prepared decision-making
documents for action "at the political level" and believed
that by July 7 the Czechs would be able to propose a date for
the arrival of a U.S. team (Comment: While this is an
encouraging sign, the level of short-term political
uncertainty means this should not be treated as the guarantee
the Czechs will have an answer by July 7th. End comment).


8. (C) MILITARY DEPLOYMENTS: The Czech political process for
authorizing military deployments for 2007 is unlikely to be
affected unless a stable government fails to emerge before
the last few months of the year. Although the Cabinet
decision on the 2006 deployment package was taken in August
of 2005, the final bill was not approved in Parliament until
December. The 2006 deployments enjoyed widespread approval
in Parliament. Without perspective-changing circumstances,
such as combat casualties, the 2007 deployments should enjoy
similar support.


9. (SBU) ECONOMIC REFORM AND BUSINESS CLIMATE: Both proposed
Finance Minister Vlastilmil Tlusty (ODS) and proposed
Industry and Trade Minister Martin Riman (ODS) are
well-regarded by the business community as competent
authorities. The coalition agreement to implement the ODS
flag-ship flat tax policy and commitment to lower the overall
tax burden for private citizens and businesses is good for
the overall business climate. However, in a clear concession
to the Greens, the coalition agreement does include
introducing an energy and ecology tax in 2008. The coalition
agreement to limit coal mining and prevent building
additional nuclear power plants could have significant
implications for future Czech energy security, with
dependence on Russian oil and gas likely to increase.

PRAGUE 00000737 003 OF 003


Clearly a concession to the ideological bent of the Green
Party in the coalition, this kind of energy policy, while
typical of the rest of Europe, is not/not in the interest of
the USG nor the EU in terms of enhancing Czech/EU energy
security.


10. (C/NF) COMMENT: ODS-LED COALITION VS MINORITY ODS
GOVERNMENT: If the new government is unable to win a
Parliamentary vote of confidence, the second ODS-led attempt
to form a government is expected to be a minority ODS
government with informal or explicit support of CSSD. While
under either scenario Czech foreign policy and relations with
the U.S. would remain strong and pragmatic, an ODS minority
government would have more leeway in terms of pursuing its
own traditionally pro-U.S. policies that are not/not subject
to internal coalition negotiations and buy-in. Given little
substantive difference in foreign policy between the ODS and
the CSSD, this might mean even better legislative prospects
and effectiveness for the new government. Therefore, a
protracted or an unsuccessful attempt by the center-right
coalition to form a government is not/not necessarily
detrimental for the USG.
CABANISS