The Czech president, Milos Zeman, will appoint a new three-party coalition government later today following six months of technocratic government. Although the Social Democrats will take the lead, as the party with the largest number of MPs in the lower house of parliament, the government will be broadly centrist. With a comfortable 111-seat majority in the 200-seat parliament, the new government should reliably pass a vote of confidence, the next critical step for it to begin work. The risk of fiscal slippage in 2014 is minimal, despite the CSSDs promise to roll back on austerity, as the public finances remain sound and borrowing costs are low, which will help sustain investor confidence. In our view the main risk to stability in the near term comes from the great unknown of this coalition―the working relationship between the new prime minister, Bohuslav Sobotka (CSSD) and Andrej Babis, the leader of the new party ANO 2011, who is tipped to become the new finance minister. Key negotiations remain in the days ahead about the organisation of individual ministries, which could test the stability of the new government early on. It is also yet to finalise a concrete policy package, another potential source of tension, particularly on issues such as corporate taxation. Top of the agenda for this government will be the precise nature of revenue-boosting measures (in order to support more government spending and implement policies pledged by the CSSD at last years election) and the countrys relationship with the wider EU.
Posted on: Wed, 29 Jan 2014 10:08:40 +0000
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