May 29, 2010 / 8:48 AM / 9 years ago

Centre-right wins Czech election on austerity plan

PRAGUE (Reuters) - Centre-right Czech parties advocating austerity to prevent a Greek-style debt crisis beat pro-welfare leftists in an election on Saturday and looked set to form a government able to push through deep economic reforms.

Chairman of the Civic Democratic Party (ODS) Petr Necas walks to his party's election center in Prague May 29, 2010. REUTERS/Petr Josek

The result is likely to end a year of uncertainty in which a caretaker cabinet has tried to steer the country through economic crisis after a centre-right government collapsed in the middle of Prague’s tenure of the rotating EU presidency.

While coalition talks including a new, untested centrist party may be tough, the outcome virtually eliminated chances of a stalemate.

Investors are keen for a strong government to nurture the European Union and NATO member through a nascent recovery after its economy contracted by 4.1 percent last year.

Civic Democrat election leader Petr Necas, who had said the leftists would lead the Czechs to national bankruptcy, said he would aim for “a government of budget responsibility” and his party should name the prime minister of any coalition.

“It’s good news for the Czech Republic that responsibility won over populism, and that the Czech left was not allowed to take power,” he said. “It is great news that will allow the Czech Republic to avoid a repeat of the Greek scenario.”

WARNINGS OVERBLOWN

With Czech public debt hovering at only 35 percent of annual economic output — half the EU’s average — economists say invoking Greece or warning of bankruptcy may be overblown.

But they agree that reforms of the pension and health systems are needed. They say a right-leaning cabinet is the best option for the economy and would help lift the crown currency, which fell by 0.8 percent against the euro on Friday on fears that an inconclusive vote would produce a weak government.

The Civic Democrats have proposed private retirement accounts to prevent deepening deficits in the pension system; cutting the public deficit to the EU-prescribed level of 3 percent of GDP by 2012, from 5.9 percent last year; trimming social benefits; and reforming welfare and health care.

“They seem pretty committed to trying to bring the deficit down,” said Barclays economist Daniel Hewitt.

“I think this will be crown-positive.”

The leftist Social Democrats won the most votes of any party, garnering 22.1 percent. But centre-right parties together secured a strong parliamentary majority, led by the Civic Democrats on 20.2 percent, according to official results with 99 percent counted.

Their potential allies, the conservative party TOP09, had 16.7 percent, and the centrist Public Affairs 10.9 percent.

Public Affairs is a new party that agrees with the rightist groupings’ fiscal stance, but one that analysts say could be unpredictable in coalition talks.

Public Affairs leader Radek John, a popular former TV host, said he would support the centre-right on fiscal reforms.

But his party has almost no record in policymaking, a small membership and a reputation for a populist streak that could make it a volatile partner.

Necas emerged as the Civic Democrat leader after his predecessor, former prime minister Mirek Topolanek, stepped down this year. A bespectacled trained physicist, Necas is seen by many Czechs as a thrifty everyman who has managed to distance himself from the scandals that have plagued his party.

LEFTIST LOSS

President Vaclav Klaus is expected to pick a leader to start coalition talks in the coming days after results are verified.

If the three centre-right parties join forces, they will have the largest ever majority for a Czech government — up to 120 of the 200 seats in parliament — and could end years of policy gridlock that has caused Prague to lag its ex-communist peers in pension, healthcare, and welfare reforms.

Social Democrat leader Jiri Paroubek, a leftist reviled by conservatives for an aggressive style but favoured by many Czechs for his pledges to raise taxes on companies and the rich to expand social benefits, conceded defeat and quit as leader.

“People have chosen the direction the republic should go in, and it is a different direction than the one the Social Democrats were offering,” he said. “It must be clear to everyone that this country is on track for a right-wing coalition.”

The result also quashed the fears of many Czechs that the Social Democrats could take power with backing from the Communists, who had 11.3 percent.

The Communists have not shared power since their totalitarian rule ended in the 1989 Velvet Revolution.

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