New caretaker government takes office and approves an anti-crisis package



President Vaclav Klaus has named the country’s new interim government to office, 16 new ministers were sworn in at Prague Castle. One of the main goals of the new caretaker cabinet, led by Prime Minister Jan Fischer, will be to see through the remaining two months of the Czech EU presidency, as well as to lead the country to early elections that will be held on 9-10th October at the latest.


The lower house of Parliament approved an anti-crisis package that includes a scrap incentive to boost car sales, faster tax write-offs and more generous unemployment and child benefits. The car scrap incentive would be either 30,000 or 60,000 crowns for a vehicle older than ten years depending on whether the owner acquired an ordinary car or an environmentally friendly vehicle.


Analysis and forecast (↓ decreasing risk)


The interim government’s entering office provisionally ended the political crisis which dated back to March when the previous cabinet was defeated by the opposition in a vote of no-confidence. The new administration is capable of leading the country until the early elections, while repairing the defeats of the EU-presidency presents some difficulties (see next item).

Furthermore, since the Czech economy contracted at a record pace in the first quarter (GDP shrank a preliminary 3.4 percent on an annual basis, still a modest figure compared to other economies in the region), the country would require a stricter anti-crisis package; the approved bill is a compromise agreement between the two strongest parties in Parliament, the Civic and Social Democrats, and should have no problems passing through the Senate. Since the car scrap program could not stop the shrinking of the automotive industry in Slovakia, the expected economy stimulating and job protecting effects of it are highly questioned in the Czech Republic.



Source: Eurostat



Lisbon Treaty voted but not signed



The Czech Senate has voted to ratify the European Union’s Lisbon Treaty, two and a half months after it was approved by the lower house. The motion was passed when 54 out of 79 senators present raised their hands for Lisbon ratification in Wednesday afternoon’s vote. It was effectively decided by members of the Civic Democratic Party, which had previously been opposed to Lisbon: twelve of the party’s senators voted in favour of its ratification.

One of the Civic Democrat senators leading moves to launch a new challenge at the Czech Constitutional Court to the EU’s Lisbon treaty has said it should be prepared within two months. Senator Jiri Oberfalzer made the comments after a meeting with eurosceptic Czech President Vaclav Klaus. He added that he already had the 17 signatures needed to launch the challenge. President Václav Klaus said he would not put his signature to Lisbon until the court rules on whether the document is in line with the Czech constitution. The president also said he would not sign the ratification until Lisbon has been approved by Ireland; he reiterated his view that Ireland’s no vote in a referendum last year rendered the treaty a dead document.



Analysis and forecast (↑ increasing risk)


The Senate vote has opened up a war of words between president Klaus and senate chairman Premysl Sobotka, who reminded the president that the upper chamber is a sovereign body to which Mr. Klaus owed his re-election as head of state. The tension between Mr Klaus and almost all main political actors intensified after the president received Declan Ganley, the head of the Irish eurosceptic party Libertas, at Prague Castle. These actions of the president are even more embarrassing when the governmental crisis seems to have ended and the interim government is working towards improving the image of the EU-presidency.

The Constitutional Court assessed the Lisbon treaty once last year, and concluded that the document is in line with the Czech constitution (the treaty opponents object that the court did not regard the treaty as one whole, but only its selected points). It is unlikely that the court changed its point of view, so the repeated Irish referendum in autumn will be determinative (polls now indicate that the Irish might approve the document).