US embassy cable - 05PRAGUE547

C O N F I D E N T I A L SECTION 01 OF 03 PRAGUE 000547 
 
SIPDIS 
 
E.O. 12958: DECL: 04/15/2015 
TAGS: PGOV, PREL, EZ 
SUBJECT: CZECH GOVERNMENT CRISIS: PULLING BACK FROM THE 
BRINK OF RESOLUTION - MORE UNCERTAINTY AND SPECULATION AHEAD 
 
Classified By: Deputy Political Counselor Mark Canning for reasons 1.4 
b+d 
 
1. (C) SUMMARY  The agreement on a new version of the old 
government, reached by the chairmen and vice-chairmen of the 
three coalition parties after 8 hours of negotiations late on 
the night of April 13, was rejected 15 hours later by the 
leadership of CSSD, the main party in the coalition.  Jan 
Kohout,  who had been expected to lead the new government, 
has returned to Brussels and his position as Czech Ambassador 
to the EU.  Two more ministers have resigned, bringing to 
seven the number of cabinet members waiting to have their 
resignations accepted by the president.   Coalition junior 
partner Freedom Union says the coalition is dead.  Some in 
CSSD say they expect PM Gross to try to form a minority 
government, although this is sure to further divide the 
party.  President Klaus insists the only options now are 
patching up the agreement reached on April 13 or a caretaker 
government leading to early elections.  We believe the latter 
to be the most likely scenario, although the limits imposed 
by the Constitution guarantee that the crisis will continue 
for some time as the President works to bring this about. 
End Summary. 
 
REPORTS OF MY BIRTH WERE PREMATURE 
 
2.  (SBU) The chairmen and vice chairmen of the three parties 
in the current Czech governing coalition met the evening of 
April 13 and, after more than 8 hours of difficult talks, 
seemed to have reached agreement on a new government that 
would replace the fractured coalition and bring an end to 
months of political uncertainty.  Freedom Union vice chair, 
Frantisek Pelc, who participated in the talks, said in the 
end he was not sure exactly what the leaders had agreed to. 
In the week preceding the talks,  PM Gross had proposed a 
non-political government, bringing back together the three 
parties and preserving their one-vote majority in Parliament, 
but without the leaders of any of the parties in the cabinet 
(himself included).  So it was a surprise when Czechs woke up 
the morning of the April 14 to discover that the coalition 
partners had apparently agreed  to form a new government that 
contained many of the faces of the old government, including 
the chairman and vice chairman of Freedom Union,  two vice 
chairmen of the Christian Democrats, and two vicee chairmen 
of CSSD. 
 
3.  (SBU) On the afternoon of the 14th, PM Gross presented 
the agreement to the President,  who welcomed the news that 
the crisis might be coming to an end. That evening the 
broader leadership of each of the three parties met to give 
their approval to the deal.  The coalition's two junior 
parties approved.  But the CSSD leadership rejected it. In a 
strange turn of events, Gross himself led the CSSD vote 
against the deal that he had brokered the night before, 
claiming that the Christian Democrats had demanded too much 
-- including keeping their two vice chairmen in the 
government and taking over the important Ministries of 
Agriculture and Industry.  Later on April 14 the remaining 
two Freedom Union ministers -- Nemec (Justice) and Kuehnl 
(Defense) -- resigned. 
 
4.  (C) CSSD surprise rejection of the deal -- which was 
designed to keep the current coalition partners in power 
until elections next summer, protecting the jobs of thousands 
of elected and unelected party officials -- generated 
surprise and rekindled animosity towards Gross that help 
spark the crisis in February.  Although the Christian 
Democrats (KDU-CSL) initially reacted sharply to the CSSD 
decision, on April 15 KDU-CSL Chairman Kalousek offered an 
olive branch and announced there was still a small window 
open during which CSSD could reconsider and accept the April 
13 agreement.  When asked about the plans of the Freedom 
Union, Vice Chair Pelc said the party still felt that the 
agreement was an acceptable end to the government crisis. 
Pelc said the party had no plans to discuss the matter 
internally or negotiate with coalition partners.  Pelc said 
he felt it was "unbelievable" that Gross had signaled 
acceptance of the agreement, presented the agreement to the 
president, and then attacked the agreement within his own 
party.  Pelc said his party was stunned. He said they take it 
as a very bad sign for future cooperation. 
 
CSSD REGULARS IN NO MOOD TO APPEASE CHRISTIAN DEMOCRATS 
 
5.  (C) Martin Turek, CSSD member and Deputy Chief of the 
PM's Office, told us Gross had reservations about the 
agreement even during the negotiations.   Turek said party 
members felt the agreement was too advantageous for Kalousek 
and the Christian Democrats.  He said Kalousek and fellow 
Christian Democrat Jan Kasal could hardly contain their glee 
after the agreement was supposedly reached.  Turek said that 
in the eyes of the CSSD leadership, Kalousek got everything 
he wanted:  Gross's resignation, the removal of FM Svoboda, a 
rival within the Christian Democrat party, and he placed 
three of his highest level subordinates in the most 
remunerative ministries.  Turek complained that the Christian 
Democrats had milked all they could out of the Ministry of 
the Environment under the old coalition, and were now being 
given, as part of the new coalition, the Ministry of 
Agriculture, believed to be the recipient of more than 2 
billion dollars a year in government subsidies and EU funds. 
Turek also argued that it was shameful for Environment 
Minister Ambrozek, formerly charged with protection of the 
land, to suddenly switch to the Ministry of Agriculture, 
where he would be charged with commercial exploitation of the 
land.  Finally, Turek expressed indignation at what he and 
other CSSD members perceive as a double standard on ethics. 
He argued that Gross has had to resign because of the 
inexplicable financing of his own apartment, but Kalousek 
hasn't been held accountable for the lack of clarity in his 
housing. 
 
6.  (C) Both Turek and Pelc pointed to divisions within CSSD 
itself concerning the agreement.  Pelc said he could see 
during the negotiations that Gross had a different opinion 
than CSSD Vice Chairman Sobotka, the Finance Minister, or 
Lubomir Zaoralek, the Speaker of the Parliament.  News 
reports confirm that Sobotka and Zaoralek had been willing to 
meet the demands of the Christian Democrats. These same 
reports hint that Zaoralek might be losing ground in his 
party for this, and for earlier public acknowledgment that 
early elections would be one way out of the crisis.  Pelc 
also said it was clear that PM designate Jan Kohout had a 
very different idea of what the new government should look 
like than Gross did.  Following the CSSD vote, Kohout flew 
back to Brussels and his job as Czech Ambassador to the EU. 
 
7.  (C) Another CSSD leader, Jan Prokes,  currently working 
under the Christian Democrat Transport Minister Milan 
Smonovsky,  said his party could not accept the presence of 
Christian Democrat ministers who had earlier resigned as part 
of an attempt to bring the government down.    Prokes said 
the requirement that the new coalition be without coalition 
leaders meant no party chairmen and no vice chairmen.  He 
said this would have applied to his own party as well, 
meaning that Sobotka would have had to give up one of the two 
positions, either CSSD vice chairman or Finance Minister, if 
he wanted to remain in the government. The same would have 
applied to vice chairman and Minister for regional 
Development Jiri Paroubek. 
 
8.  (C) Prokes said the party's Central Executive Committee 
would meet, possibly this weekend or next week, to decide 
what to do next.  Prokes thinks the committee will choose to 
go it alone with a minority government.  Both Turek and 
Prokes said that such a government would not have to rely on 
the communists for support, a move that would almost 
certainly cause widespread public dissatisfaction, and more 
departures from the cabinet.   Both Turek and Prokes point 
out that much of the CSSD program is incompatible with the 
communist program. 
 
9.  (C) The constitution wouldn't require PM Gross to submit 
his minority government to parliament for a vote of 
confidence.  As long as the PM stays in office, the 
constitution recognizes changes in the cabinet, even the 
entire cabinet, as personnel changes in the existing 
government, and not a new government.  Prokes thought Gross 
would still submit the minority government to a confidence 
vote, as he earlier pledged to do.   It is difficult to 
imagine how such a government would get through a vote of 
confidence without the support of the Communist party. 
 
KLAUS PROMISES TO PREVENT MINORITY GOVERNMENT 
 
10.  (SBU) President Klaus made a public statement April 15 
saying he thought the only two ways out of the impasse were 
to patch up this week's agreement (keep the same three 
parties running the government), or to have an interim 
government that prepares for early elections.  He insisted 
there was no "third way" and that he would not permit the 
formation of a minority government.  He called on the three 
party leaders to formally tell him whether or not they 
consider the April 13 agreement to have any future.  If the 
answer is no, then he will start negotiations with the 
parties on formation of an interim government and approval 
for early elections. 
 
11. (C) However Klaus's authority in this regard is limited. 
Klaus cannot dissolve parliament nor can he force Gross to 
agree to early elections.  Parliament needs to approve a bill 
shortening their term.  Seven of Gross's 18 cabinet ministers 
have resigned, though Klaus has not accepted any of the 
resignations.  The ministers are all continuing in their 
functions, though to a much more limited degree.  According 
to the constitution, Klaus must accept the resignations; 
however, no deadlines are imposed.  If Klaus were to accept 
the resignations now,  Gross would likely nominate CSSD 
members or nonpartisans to fill the spots. Thus Klaus's 
extra-constitutional decision to not act on the resignations 
is his method of preventing creation of a minority government 
and keeping pressure on Gross to negotiate on his terms.  If 
three more ministers resign (and more than three have 
indicated they would resign if a minority goverment dependent 
on Communist support became a reality), then these ten 
ministers could approve a pending cabinet motion for the 
government as a whole to resign, freeing Klaus to appoint a 
new government. 
 
12.  (C) COMMENT.  Gross has clearly lost control of the 
situation, angering some of his most loyal supporters in the 
party (Sobotka and Zaoralek), angering the President (who had 
publicly endorsed the April 13 deal just hours before CSSD 
killed it), and rekindling the animosity with Kalousek.  His 
days as head of government are numbered.  Of the three 
options on the table -- minority CSSD government, 
resurrecting the three-party coalition on the basis of the 
April 13 agreement, or caretaker government leading to early 
elections -- the latter is now the most likely.  The idea of 
a minority government with Communist support will generate 
enough resignations to bring down the government; we are also 
increasingly hearing it will trigger public protests.  There 
is always a chance that the instinct of self-preservation 
will force the CSSD to reconsider the April 13 agreement, but 
Gross may already have divided the party to such an extent 
that they will never be able to agree on a rational division 
of seats (the left-wing of the party appeared to have almost 
no positions of power under the April 13 agreement). 
Bringing about early elections will not be easy, which is why 
the crisis is likely to continue for some time.  But Klaus 
has demonstrated that he is already willing to stretch the 
limits of his constitutional authority to deal with the 
situation.  We certainly expect that any interim government 
under this scenario would be heavily influenced by the 
President (which should, on balance, be a positive in terms 
of foreign policy and transatlantic relations). 
HILLAS