US embassy cable - 05PRAGUE184

C O N F I D E N T I A L SECTION 01 OF 03 PRAGUE 000184 
 
SIPDIS 
 
E.O. 12958: DECL: 02/07/2015 
TAGS: PGOV, PREL, PINR, EZ 
SUBJECT: CZECH PM STANISLAV GROSS: SHROUDED IN CONTROVERSY 
AND FACING FIRST REAL CALLS FOR RESIGNATION 
 
REF: A. PRAGUE 1857 
     B. PRAGUE 1758 
 
Classified By: Political Officer Renata Sykorova Turnidge for reasons 1 
.4(b) and (d). 
 
1.  (C) Summary.  Czech Prime Minister Stanislav Gross is 
under increasing pressure from the opposition and the public 
to explain the unclear origin of money used in 1999 to 
purchase the family's luxury Prague apartment, or to resign. 
His inability to explain his source of financing for the 
apartment is one of many scandals he has faced in recent 
months.  So far, Gross has failed to clear his name.  The 
current scandal is the first during Gross's brief (six month) 
tenure as Prime Minister that could actually force him from 
his position.  However, the lack of a clear successor is the 
primary factor many cite in their expectation that Gross will 
weather this storm and be confirmed as party chairman at the 
Social Democratic Party (CSSD) Congress in March.  Even if he 
survives, the scandals will surely weaken his position and 
have emboldened the opposition Civic Democratic Party (ODS). 
The latest scandals are a reminder of Gross's biggest 
vulnerability:  the lack of transparency surrounding his 
political and personal life.  They threaten to overshadow 
Gross's efforts to implement basic economic reforms prior to 
the 2006 election and his plans to revitalize CSSD. On 
foreign policy issues of importance to USG, Gross continues 
to pull through, most notably on the recent parliamentary 
extension of the military police deployment in Iraq. End 
Summary. 
 
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Scandal-Ridden PM 
----------------- 
 
2.  (C) The youngest Prime Minister in Czech history, Gross 
(34), has been embroiled in controversy over the years, but 
the media started paying closer attention recently.  Some 
speculate that this is part of a concerted smear campaign 
against Gross prior to the March 25-27 CSSD Congress, 
although there is little evidence to support this claim.  The 
unexplained financing for the CZK 4.2 million (USD 180,000) 
Gross family luxury flat in an exclusive Prague neighborhood 
is only one of the recent scandals.  The scandals have 
damaged Gross's reputation and have prompted calls this week 
for his resignation -- so far these calls are isolated, but 
they are the first since Gross became Prime Minister last 
August.  Gross's purchase of a flat that is beyond his means 
serves as proof of corruption for some political observers, 
who have talked about the PM's murky business dealings for 
years (the additional news this week that Gross's wife 
purchased an expensive piece of real estate in Prague, whose 
financing is also unknown, has added fuel to the fire).  Many 
who know him personally claim that Gross, who has a 
working-class background (born to a driver and secretary, and 
is a former train technician) is simply taking advantage of 
the side benefits of high-level politics, nothing unusual for 
Czech politicians. 
 
3.  (C) Just as disturbing as suspicions regarding his 
unethical behavior in office are reports that Gross, while 
Interior Minister, overstepped his authority when he created 
the "Mill" police squad, a secret unit that answered directly 
to him and allegedly gathered information on political 
opponents and big financial cases.  He and current Interior 
Minister Frantisek Bublan face an official inquiry from the 
Chamber of Deputies to explain the squad's operations. 
Gross, who recognizes the importance of information, is well 
known in political circles for his ability to gain useful 
information on political opponents.  He reportedly built the 
backbone for his network of information sources at the 
Ministry of Interior in the mid-1990s when he befriended 
former directors fired by then Interior Minister Jan Ruml as 
part of purges of former Communist officials from the 
Ministry.  Gross still has sensitive information on various 
political figures, according to CSSD insiders. 
 
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Gross and All His Men 
--------------------- 
 
4.  (C) Gross's biggest problem lies with his bad judgment in 
choosing advisors. Some argue that he does not have a good 
feel for people.  However, Gross's pragmatic approach to 
politics and love of power suggest that Gross intentionally 
chooses his advisors to help him get ahead.  Many of the 
people who helped Gross rise to the top of party ranks and 
have been employed for years behind the scenes have ties to 
the former Communist regime.  Among the most well known are 
former First Deputy Interior Minister and CSSD parliamentary 
caucus chair Petr Ibl, once a guard in a prison where 
political dissidents were held, and former Deputy Police 
President Vaclav Jakubik, another prison guard under the 
Communists, who performed his duties without a proper 
security clearance.  Ibl and Jakubik both attended the Police 
University prior to 1989.  Perhaps Gross's main misstep was 
his appointment of a former leader of a police unit 
responsible for dispersing crowds during the 1989 
demonstrations, Pavel Pribyl, as the chief of government. 
Pribyl later resigned under public pressure, but the damage 
was done. 
 
5.  (C)  It is unlikely that Gross will get rid of these 
people, because he is indebted to these old-timers who helped 
him into his current position.  Their futures are tied. 
Gross, however, also has made some good personnel choices. 
He invited more economic experts into his advisor team, 
something CSSD lacked in the past.  He chose an experienced, 
well-educated economist Jan Mladek as his special economic 
advisor, and the dynamic and young non-party member Martin 
Jahn as Deputy PM for Economic Policy. He has earned kudos 
for these decisions from non-partisan economic experts. 
Gross recently also has gotten rid of lobbyist Andrej Surnak, 
whose PR agency Crane Consulting masterminded the expensive 
but ineffective "I mean it sincerely" pre-election campaign 
for the failed November '04 Senate and regional elections. 
 
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What Makes Gross 
---------------- 
 
6.  (C) Gross was once held up as a prime example of a new 
generation of leaders:  young, smart, untouched by 
corruption, and part of a new era of politicians with no ties 
to the Communist regime.  However, Gross has failed to meet 
most of these expectations.  He is a mixture of 
contradictions.  On the one hand, he is sharp, politically 
savvy, and hailed within CSSD for his communication skills 
(the sort of skills that former PM Spidla lacked).  On the 
other, he lacks vision, clear moral principles, and life 
experience outside of politics.  His Machiavellian drive for 
power overrides other guiding principles and fuels his 
flexible, pragmatic approach to politics.  Party insiders 
agree that he owes his meteoric rise to the top spot in CSSD 
to his extraordinary talent for political negotiations, as 
well as his access to information.  Other words used to 
describe him are workaholic, gifted manager, and a regular 
guy.  Gross likes to portray himself as man with a common 
touch, and until recently enjoyed the public's trust, leading 
in popularity in opinion polls for five years. He generally 
says few things of substance or comes down clearly on 
controversial issues, and tries to avoid conflict at all 
costs.  He is known as a loner, and even those closest to him 
are unable to define his character or beliefs.  Many older 
Czechs find his age a problem and view it as a sign of lack 
of maturity for the job of premier. 
 
7.  (C) Although young, Gross is an experienced politician. 
Since entering politics in 1989, he joined the re-established 
CSSD where he was elected chair of the Young Social Democrats 
in 1990.  He quickly rose through the senior party ranks and 
became deputy in the lower house in 1992.  In the late 1990s, 
his posts included chairman of the CSSD parliamentary caucus 
and vice speaker of the Chamber, partly because he was able 
to make friends with the right people at the right time. 
Former PM Milos Zeman recognized Gross's mass appeal and made 
him Interior Minister in  1999.  Gross was considered CSSD's 
crown prince for a while, but quickly went from crown prince 
to former PM Zeman's arch enemy.  He was elected first 
vice-chairman at the 2001 party congress.  Despite his 
initial hesitancy, his party allies helped propel Gross to 
position of acting chair and PM after removing Vladimir 
Spidla as party chair in summer 2004. 
 
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It's Not All Bad 
---------------- 
 
8.  (C) While the controversies involving Gross overshadow 
all else related to the government these days, Gross has had 
some positive impact on the political scene and his party. 
He managed to put together a working governing coalition 
after Spidla's ouster in July 2004, and consolidated the 
CSSD, albeit temporarily, after taking over as acting party 
chair.  Due to inherent conflict within the party (ref A), 
neither Gross nor any other CSSD leader is capable of uniting 
the party for the long-term at this time.  Together with 
Finance Minister Bohuslav Sobotka, he is making an effort to 
revitalize the troubled and divided party, which has lost 
more than half its voters since winning the 2002 elections. 
Their plans include transforming CSSD into a more centrist, 
modern European Social Democratic Party.  At the January 
party program conference, Gross pushed through a pre-2002 
election strategy that encompassed a drop in income tax for 
low and medium wage-earners, but the rejection of school 
tuition or co-payments for medical treatments is a reflection 
of the strong opposition from the left wing in the party to 
any shift toward the center.  In addition, even though his 
interest does not lie in foreign policy, Gross is making a 
concerted effort to be well-informed about important issues 
and to fulfill all obligations toward NATO and the EU.  He 
has been forthcoming in our dealings, and fought for the 
parliamentary approval to extend Czech troops in Iraq until 
end of 2005, although it was not a popular move within CSSD. 
 
 
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Comment 
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9.  (C) Scandals surrounding politicians purchasing housing 
beyond their means are common in the Czech Republic, as in 
many countries.  Indeed, allegations and rumors about Gross's 
1999 purchase have circulated for years; the fact that many 
top Czech politicians from across the political spectrum have 
acquired expensive housing led many to believe that Gross 
would prove as adept at weathering this scandal when it 
resurfaced in the press last week as he had the many others 
during his political career.  However, Gross's missteps (he 
has offered three separate and contradictory explanations for 
the financing, most centered around the supposed largesse of 
a retired uncle) have emboldened his opponents, and this 
week's parliamentary plenary session is likely to be 
dominated by the affair.  While we take the calls for his 
resignation seriously, as of today Gross is likely to weather 
the storm.  The calculus remains the same:  ODS is not ready 
for early elections (which are constitutionally difficult to 
call), and the divided CSSD has no likely successor to Gross, 
who has so far skillfully built support within the party in 
advance of the March Party Congress.  Assuming he does carry 
on as Prime Minister, this latest scandal will surely weaken 
Gross's political and popular position, no matter how large a 
mandate he receives at the Party Congress. 
 
10. (C) Looking ahead, there is no doubt that CSSD will fare 
poorly in the summer 2006 elections, which are widely 
expected to bring ODS to power after eight years.  Without 
any strategic vision, many doubt Gross will stick around to 
lead the party in opposition since he does not like to be on 
the losing side.  Gross is young and well connected, and has 
left the door open for joining the more lucrative business 
world. 
CABANISS