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Czech Parties Seek PM After Spy Affair to Avoid Elections

By Peter Laca and Lenka Ponikelska
June 17, 2013 1:07 PM EDT 8 Comments
Czech Prime Minister Petr Necas also quit as the chairman of the Civic Democratic Party.
Photographer: Janek Skarzynski/AFP via Getty Images
Czech Prime Minister Petr Necas also quit as the chairman of the Civic Democratic Party.

The Czech Civic Democrats and their coalition partners are working to quickly replace Petr Necas as premier to keep the conservative government in power through 2014 and fend off Socialist attempts to force early elections.

Leaders of the ruling parties are trying to narrow the field of candidates for prime minister after a scandal over spying and bribery charges forced Necas to quit. He submitted his resignation to President Milos Zeman at Prague Castle today, rather than face an opposition-led no-confidence vote tomorrow.

Necas leaves a $217 billion economy mired in the longest recession since current records started in 1996. He focused on austerity, which hurt household consumption while businesses curbed spending amid the euro-area debt crisis. The country has endured seven governments and six prime ministers since Zeman finished his four-year term as premier in 2002.

“For us, the priority is to preserve this coalition project,” Martin Kuba, the Civic Democrats’ first deputy chairman and industry minister, told reporters at the party’s headquarters in Prague. A government formed from current coalition parties “is important to allow the continuation of responsible budget policy.”

The koruna strengthened 0.4 percent to 25.611 per euro by 6:29 p.m. in Prague, after losing 0.6 percent in the two days following the raids on government offices last week. The benchmark PX stock index fell 0.3 percent to 924.41, its lowest close since Aug. 13, 2012.

Party Talks

Zeman will meet the leaders of political parties starting on Friday to hash out the options, he told reporters today after receiving Necas’s resignation. Necas will remain as caretaker Prime Minister until Zeman names his successor.

“I assume that the political parties will use the time until then to negotiate the new situation within their leadership and eventually also among themselves.” Zeman said.

If attempts to re-create a government of the current parties fail and the country moves toward early elections, trials of people connected to the former prime minister and his party may put it at “a further disadvantage,” Peter Attard Montalto, a strategist at Nomura International Plc in London, said in an e-mail today.

“An opposition win would result in looser fiscal policy, reversal of tax increases and social security reforms on pensions in particular,” he said.

Bulgarian Strife

Parts of former communist eastern Europe have been rocked by political instability as Europe’s debt crisis forced economies still in transition to tighten spending and follow Germany’s austerity blueprint.

Bulgarian Prime Minster Plamen Oresharski came to power one month ago following nationwide anti-austerity protests that brought down the government. Now he, too, is facing calls to step down today because of the unpopular appointment of a security chief.

Necas said he wants his replacement to come from the same party to ensure continuity and keep the poll-leading Social Democrats from forcing early elections.

In 2009, Prime Minister Mirek Topolanek, also a Civic Democrat, lost a no-confidence motion halfway through the country’s six-month term as EU president, after his rival, then-opposition leader Jiri Paroubek garnered enough support to push a confidence vote through in the split parliament.

Majority Evaporates

Necas took power with what then was the biggest parliamentary majority since the Czech Republic gained independence two decades ago. That cushion disintegrated last year when bickering over austerity resulted in the breakup of a junior coalition member and the defection of other deputies.

While Necas managed to hang on and defeat a no-confidence vote with the help of independent lawmakers, his fate was sealed after last week’s raids.

The Social Democrats, led by Bohuslav Sobotka, has promised to raise some taxes to pay for higher spending it says is needed to revive the economy. Sobotka may need to rely on the Communist Party to pass some bills if he doesn’t win an outright majority in parliament or fails to find other coalition partners.

The three current coalition parties, which control 98 seats in the 200-member parliament, have to secure a simple majority in the assembly to install a new government. They have relied on the votes of former coalition deputies who defected their parties to pass legislation.

Necas urged Zeman to respect tradition and name a successor from parties that show majority support in parliament.

Illegal Surveillance

The government has been rocked by a scandal that erupted June 13 after nighttime police raids resulted in the detention of eight people including Jana Nagyova, the head of Necas’s office. She is charged with abuse of power in ordering the illegal surveillance of three people and is linked to a bribery case in which prosecutors say former members of parliament were offered jobs at state-controlled companies.

“I was very closely following the developments of the political situation that began on Wednesday and I am aware of consequences for me,” Necas, 48, told reporters in Prague yesterday.

Nagyova, who has worked with Necas since at least 2006, was charged along with seven other people, including the former and current heads of military intelligence. During the raids, officers from the organized crime police unit seized as much as 150 million koruna ($7.8 million) in cash and some gold after raiding 31 homes.

Corruption, Bribery

Civil servants and military officials were charged with abuse of power, while other detainees were charged with bribery and corruption, prosecutor Ivo Istvan said. In the bribery case, ex-lawmakers were offered jobs in state-owned companies, according to Istvan.

Nagyova illegally asked intelligence officers to spy on a person in a “private” matter, Istvan said, without identifying the victim.

He didn’t elaborate on other victims. She faces as much as five years in prison if convicted, according to Robert Slachta, the head of the police organized crime unit. Nagyova will appeal the court decision to keep her in custody, CTK reported, citing her attorney Eduard Bruna.

Nagyova said she may have made a mistake, though she didn’t understand it as illegal activity, CTK cited Bruna as saying.

Prosecutors suspect that one of the detainees, a former head of military intelligence service, was involved in spying on Necas’ wife, which was ordered by Nagyova, CTK reported, citing attorney Tomas Sokol. Necas, who is separated from his wife, said in a statement on June 11 that the couple had agreed to an uncontested divorce.

To contact the reporters on this story: Peter Laca in Prague at placa@bloomberg.net; Lenka Ponikelska in Prague at lponikelska1@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net

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