US embassy cable - 05PRAGUE1130

C O N F I D E N T I A L SECTION 01 OF 02 PRAGUE 001130 
 
SIPDIS 
 
E.O. 12958: DECL: 07/28/2015 
TAGS: PGOV, ECON, PINR, EZ 
SUBJECT: CZECH DEPUTY PM JAHN CONSIDERS JOINING CSSD AND 
REVIEWS DOMESTIC POLITICAL SCENE 
 
Classified By: ADCM Mike Dodman for reasons 1.4 b+d. 
 
1.  (C) Summary:  During a meeting with the Ambassador, Czech 
Deputy Prime Minister Martin Jahn offered views on his 
possible political future, potential political scenarios 
heading into next summer's elections, and the fate of 
economic legislation.  Jahn confirmed that PM Paroubek has 
asked him to join the Social Democratic party (CSSD) and 
offered him the leading slot on the party's Prague list for 
the 2006 elections.  Jahn is debating the offer, torn between 
his personal inclination more towards the center-right and 
his desire to help the CSSD reform (not to mention his own 
career ambitions).  He offered strong support to Paroubek, 
praising his energy and political skills.  He believes that 
if CSSD comes out ahead in the elections Paroubek would be 
willing to form a minority government with communist support, 
but expects that scenario is less likely than a formal or 
informal agreement between CSSD and center-right ODS.  Jahn 
expects the Paroubek government will push through a 
bankruptcy reform this year, but otherwise does not expect 
significant reform measures before the election.  End summary. 
 
2.  (C) Ambassador met over breakfast on July 26 with Czech 
Deputy PM Martin Jahn, who is responsible for economic 
issues.  Jahn (35) is former head of CzechInvest and 
currently not a member of any political party.  He has been a 
close and reliable embassy contact during his one year in 
government, and also a close partner of the AmCham. 
 
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Jahn considers joining CSSD 
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3. (C) Jahn told the Ambassador that PM Paroubek had asked 
him to join the CSSD and offered to place Jahn at the top of 
the CSSD election list in the Prague region (subsequent press 
reports made this public, adding that Prague native Paroubek 
intends to run in another district, likely Usti nad Labem, 
apparently to avoid a direct contest in Prague with ODS 
leader Mirek Topolanek).  Placement at the top of the ticket 
would likely assure Jahn a seat in the next parliament.  Jahn 
has promised to decide by mid-August.  He told Ambassador his 
conditions for accepting would include the guarantee of a 
ministerial slot if CSSD is a part of the next government, 
and assignment as the next Czech EU Commissioner when former 
PM Spidla is replaced in 2009, assuming CSSD is in a position 
to make such an appointment. 
 
4. (C) Jahn said the decision is a difficult one, as his 
natural inclination is to the center-right, but that his 
participation in CSSD-led governments means he has no 
political alternative.  Motivating him to accept the offer is 
a strong desire to see a modern (i.e., liberal in the Blair 
sense) Social Democratic party in the Czech Republic -- he 
termed Finance Minister Sobotka the only other force in this 
direction within the CSSD, and therefore sees his 
participation within the party as important for this goal. 
He admitted that his family is torn over the decision, but 
said that even if CSSD does not form the next government, 
four years in Parliament -- perhaps as head of European 
affairs committee -- would not be intolerable. 
 
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Paroubek said to prefer minority government 
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5. (C) Jahn repeatedly praised Paroubek, terming him 
extremely hard working, and making clear that he considers 
nearly all other prominent Czech politicians "lazy." 
Remarking on Paroubek's high popularity ratings (note:  polls 
released this week indicate he is now the most popular Czech 
politician, surpassed only by the recently deceased Pavel 
Dostal, former Culture Minister) and apparent strong support 
within the CSSD, Jahn said he expects these may begin to 
unravel in September when the 2006 budget debate gets 
underway. 
 
6. (C) Jahn believes it is too soon to predict who will win 
next summer's elections, but he (like all other commentators) 
clearly believes that CSSD now has a good shot to come out 
ahead of ODS.  Jahn said Paroubek,s preference if CSSD is 
victorious next year would be a minority government.  He said 
Paroubek would have no problem relying on the support of the 
Communist Party.  But Jahn expects that, in the end, ODS 
would decide to support a CSSD minority government, in order 
not to be accused of having let the communists into power. 
(Comment:  Since Jahn would potentially be a minister in this 
government, this may be wishful thinking on his part.)  He 
also thought a "grand coalition" between CSSD and ODS was a 
strong possibility. 
 
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Cabinet shuffle or removal of Gross not likely 
--------------------------------------------- ------- 
 
7. (C) Looking at the months between now and the election, 
Jahn said a cabinet reshuffle is not likely.  Singling out in 
particular Health Minister Emmerova and Justice Minister 
Nemec, Jahn said he thought Paroubek would be happy to be rid 
of some ministers that had proven obstructionist, but added 
that Paroubek is not prepared to pay the political cost of 
alienating core elements of his coalition that would surely 
accompany any reshuffle.  Jahn likewise does not expect 
Paroubek will make a move to replace former PM Gross as CSSD 
party leader.  Part of the problem is that CSSD does not plan 
a party congress before next June.  But he also believes that 
Gross retains a high level of support among party members. 
Jahn believes Gross will continue to keep a low profile until 
polling numbers indicate that his approval rating has 
improved.  (The most recent polls show Gross's approval 
rating up slightly to 25%, versus 63% for Paroubek.) 
 
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Good chance for a bankruptcy bill, but not the best one 
--------------------------------------------- ------- 
8.  (C) Jahn said he is optimistic that the government will 
win approval of its draft bankruptcy legislation later this 
year.  He admitted that the current CSSD proposal, based on 
the draft prepared by the Justice Ministry, is deficient in 
several areas, notably protection of creditors, rights, but 
that it is a huge improvement over the existing law.  (Note: 
Jahn has dropped his initiative to win government approval 
for his own version of the bankruptcy law, drafted in 
cooperation with AmCham.  AmCham has therefore shifted its 
focus to the ODS, which has separately put forward a 
parliamentary proposal that is essentially the AmCham, nee 
Jahn, draft.  This has chilled relations between Jahn and the 
AmCham, although they continue to cooperate actively on other 
proposals, including successful implementation of the 
recently enacted improvements to the commercial registration 
process.) 
 
9.  (C) Jahn thinks other significant economic reforms are 
unlikely before the next election.  He noted that a recent 
flap over alleged Paroubek remarks that pension reform does 
not need to be a top GOCR priority stemmed in part from the 
fact that Paroubek was misquoted.  Jahn said the PM knows 
that pension reform is a priority, but realizes that it is 
not something that will get done before the next election, 
and the fact that the pension fund is currently in surplus 
(and will be for at least another twenty years) means there 
is no immediate crisis. 
 
--------------------------------------------- - 
A good political move, but no guarantee of CSSD reform 
--------------------------------------------- - 
 
10.  (C)  Comment:  Jahn had made clear to us for some time 
his desire to remain in the public sector, with the ultimate 
goal of serving in Brussels.  While the public and private 
response to the trial balloon that has now been released in 
the press will surely shape his decision, our assessment is 
that he is likely to accept Paroubek,s offer and run for 
Parliament next summer on the CSSD ticket.  Ironically this 
will put him in direct competition with ODS chief Topolanek, 
who Jahn described as one of his few remaining supporters 
within ODS. 
 
11. (C) Bringing a prominent pro-business figure into the 
party, and running him in the country's most prosperous 
district (an ODS stronghold), would mark the latest in a 
string of shrewd political moves by Paroubek.  It would not, 
however, indicate that Paroubek is committed to the "New 
Labour" vision of CSSD that Gross was previously advocating. 
Whether or not Jahn would be successful in reshaping the CSSD 
would depend largely on Paroubek,s future political 
calculations.  End comment. 
CABANISS