US embassy cable - 05PRAGUE572

C O N F I D E N T I A L SECTION 01 OF 02 PRAGUE 000572 
 
SIPDIS 
 
E.O. 12958: DECL: 04/21/2015 
TAGS: PGOV, PREL, EZ 
SUBJECT: THE "NEW" CZECH GOVERNMENT: OLD WINE IN AN OLD 
BOTTLE? 
 
REF: PRAGUE 547 
 
Classified By: Deputy Political Counselor Mark Canning for reasons 1.4( 
b) and (d) 
 
1. (SBU) SUMMARY.  The three parties in the Czech ruling 
coalition have agreed to end a three-month government crisis 
and renew their cooperation.  If the current proposal is 
accepted this weekend by the central committee of the main 
coalition party, the CSSD, PM Gross would resign next week 
and be replaced by the current Minister for Regional 
Development and CSSD Vice Chair, Jiri Paroubek.  This new 
government would retain the one-seat majority in Parliament 
and be expected to serve until elections next summer. 
Leaders have dropped any reference to non-political or pro-EU 
governments:  the current proposal is for a political 
government with policy priorities and members nearly 
identical to those of the Gross government.  FM Svoboda and 
DefMin Kuehnl would stay in their position, although DPM Jahn 
may not.  With tensions still high between and within the 
coalition parties, a vote of confidence in a new government 
is not assured.  END SUMMARY 
 
2.  (SBU) If this deal is approved, it will mean continuity 
in the areas most important to the US.  Head of the CSSD 
Parliamentary Club, Michal Kraus told the DCM Apr 20 that the 
new government's policies will be exactly like those of the 
old government.  CSSD and Gross have, during the latter 
stages of the crisis, been calling for a Pro-European 
government that would have as its first priority a campaign 
in favor of the EU constitution.  Kraus said this idea has 
been dropped.  Kraus thought the Czechs, who are the only EU 
member yet to fix a method for voting on the constitution, 
would probably have a referendum on the issue, though he 
couldn't say whether it would be before, or part of the 
elections next June.  According to Kraus, most of the issues 
this government is likely to deal with, if it survives the 
remaining 14 months before the next general election, will be 
domestic one, including budget, taxes, and housing. 
 
3. (C)  The ministries of Defense and Foreign Affairs will 
remain under current ministers Karel Kuehnl (Freedom Union) 
and Cyril Svoboda (Christian Democrats).  Svoboda, who has 
confirmed his intention to stay, is very pro-American.  For 
example, during discussions on the arms embargo on China at 
the recent EU foreign ministers Gymnich, Svoboda argued that 
in light of the recently started political dialogue with the 
US, it only made sense to wait and see how the talks go 
before revisiting the issue.  One area of concern is the 
possible departure of Deputy Prime Minister Martin Jahn, who 
had been pushing reform of the bankruptcy law and other 
pro-business measures.  Jahn's participation in the new 
government was not clear as of Apr 20. 
 
4. (SBU) The latest agreement reflects a significant amount 
of chaos within CSSD.  Throughout the crisis, CSSD and Gross 
have made inconsistent statements, or made demands and then 
dropped them.  For example,  two weeks ago Paroubek said, "I 
want to say openly that the voters gave us a choice of two 
mandates, either a majority government with the right of 
center opposition party the ODS,  or a minority government 
supported by the communists.  Any recreation of the 101 seat 
coalition would be an attempt to revise the mandate of the 
voters."  Now Paroubek is planning to lead that recreated 
101-seat coalition.  Another example:  for nearly two weeks 
Gross has been proposing a semitechnical government that 
contained no party leaders.  The proposed government will now 
be led by CSSD Vice Chair Paroubek, and contain CSSD Vice 
Chair Sobotka as Finance Minister,  Freedom Union Chair Nemec 
as Justice Minister, and Vice Chair Kuhnl at Defense.  CSSD 
has also been saying all along that they would not accept 
anyone who broke up the old coalition, referring to the 
Christian Democratic ministers Ambrozek, Svoboda, and 
Simonovsky, who had resigned.  Yet all three would keep their 
places in the proposed new government. 
 
5. (SBU) The agreement is seen as a victory for the Christian 
Democrats.  From the start of this crisis in January, the 
goal of Christian Democratic leader Miroslav Kalousek has 
been to get rid of Gross, and that is the only significant 
change that this new government would bring.  The only 
concession the Christian Democrats appear to have made in 
order to close the latest deal is that its three ministers 
will give up their positions as party vice chairs. 
 
6. (SBU) The agreement is also good news for Freedom Union. 
The party is only polling two percent, well below the five 
percent threshold for entry into parliament.  Early elections 
would have meant an end to the party's role in government. 
Now it looks as though they'll not only keep their old posts, 
both government and party,  but they might pick up extra 
responsibilities if Justice Minister Nemec inherits the 
legislative council post of Minister Without Portfolio Bures, 
who will not be replaced. 
 
7. (SBU) PM Gross informed President Klaus about the new 
agreement by telephone on Apr 19.  Klaus has not yet issued a 
public statement on the deal, perhaps a reaction to the early 
public endorsement he gave to the deal reached last week that 
subsequently collapsed.  But the latest deal meets the 
minimum requirements Klaus had earlier established, namely a 
coalition with a majority in Parliament.  Once each of the 
three coalition parties has formally approved the deal -- 
with the key being the CSSD on Apr 23 -- Gross will formally 
submit the resignation of the cabinet to the President. 
Klaus had previously stated that he would turn first to the 
CSSD to lead a new government.  The Paroubek government -- 
which would be the third CSSD-led, three-party coalition 
government since elections in 2002 -- would require a vote of 
confidence.  Given the slim majority and the acrimony of 
recent months, there is no guarantee that this would pass. 
 
8. (U) Paroubek (53) has a business background.  He was never 
a member of the Communist Party.  He became a CSSD member in 
1990, and since 1991 was involved in Prague city government. 
From 1998-2004 he was Vice Mayor of Prague in charge of 
finances, until becoming Minister of Housing and Regional 
Development when Gross took office last August.  He was 
elected CSSD Vice Chairman at the party congress in March. 
 
9.  (C) As the man in charge of finances for many years in a 
city that tolerates corruption, Paroubek has a reputation as 
a deal-maker, not a man of principle.  In the early 90s he 
was in the CSSD right wing.  Last week he said publicly that 
he could live with a minority government supported by the 
communists.  He is very close to Gross, who will retain his 
position as CSSD Chairman.  Kraus told the Embassy that 
Paroubek was chosen over Finance Minister Sobotka because 
Paroubek was the kind of fighter who could lead the party to 
the next elections. 
 
10.  (C) COMMENT. Overall, this latest deal represents a good 
outcome for the US, as some of the most important ministers 
would keep their positions, although Jahn's departure would 
be a loss.  But the fact that the crisis has gone on for so 
long reflects some of the problems in Czech politics:  weak 
ties between constituents and parties,  journalists who print 
unsubstantiated accounts, along with a tendency to fight 
political battles in public, rather than behind closed doors, 
and the general unsettled nature of the political spectrum. 
Public disgust has been growing as the crisis has continued, 
and the current solution -- essentially the status quo -- 
will leave many scratching their heads.  Kraus told the 
Embassy that three months of political tension have left 
relations between the three parties "frozen, the worst in 
years."  The fragile coalition, with just a single seat 
majority in parliament, is going to have to first win a vote 
of confidence, then pass difficult pieces of legislation, 
such as the 2006 budget.  Assuming the latest deal gets over 
the immediate hurdle of winning CSSD approval, and the 
current crisis actually comes to an end, we certainly should 
not expect smooth sailing between now and next summer's 
election. 
HILLAS