Ceska Pozice

EU budgetary integration threatens to topple Czech coalition

Czech foreign minister vows his TOP 09 party will exit the government if PM Petr Nečas refuses to sign EU budgetary integration deal

Tom Jones 13.1.2012

Životaschopnost kabinetu zásadním způsobem ovlivňuje nedostatek autority všech tří předsedů koaličních stran. foto: © ČTKČeská pozice

Životaschopnost kabinetu zásadním způsobem ovlivňuje nedostatek autority všech tří předsedů koaličních stran.

Literarily minutes after a potential crisis within the government over restitution of church property was defused, a potentially far more serious rift emerged between the two larger parties in the center-right coalition. Foreign Minister Schwarzenberg says it’s imperative Prague signs up to the EU’s financial and budgetary integration initiative. President Václav Klaus says he’ll block any such move.

Schwarzenberg, leader of the center-right TOP 09, has unequivocally positioned his party as a pro-EU by backing budgetary and fiscal integration, the terms of which are being finalized principally by the finance ministries in Berlin and Paris, albeit to a lesser extent. French President Nicholas Sarkozy announced following his meeting a meeting in the German capital on Monday with Chancellor Angela Merkel that the terms of the new fiscal and budgetary integration agreement will be ready by the end of January.

The Czech foreign minister says TOP 09 is ready to support it. “We will position ourselves as a clearly pro-European party, which adheres to deeper European integration, and will try to lead the country into the mainstream [of the integration process]. We are no EU-grovelers, but with our position towards Europe we are fundamentally different from the euro-hesitant go euroskeptic Civic Democrats (ODS),” Schwarzenberg told the daily Lidové noviny (LN), referring to the party of Prime Minister Petr Nečas, of which Klaus was the founder. 

No choice

‘We’re not an island between Europe and America. We’re simply economically dependent on the European Union to where 80 percent of our exports go, thus we can’t remain outside of European politics’In an interview published in Thursday’s edition of LN, Schwarzenberg said that while he has reservations about the current move towards further EU integration he agrees with the UK’s foreign minister, William Hague, on a range of EU issues. Due to the Czech Republic’s geographical position and deep dependence on exports to countries in the eurozone — first and foremost Germany — Schwarzenberg said Prague simply has no choice other than to join the mainstream movement towards further integration,  which would force the country to relinquish some sovereign powers over budgetary and fiscal policy to Brussels.

“I won’t sit in a government which leads the Czech Republic out of the mainstream of European integration. It is in our vital interests to be at the table and take part in the fundamental decisions that will have a strong influence upon us,” Schwarzenberg told LN.

“We’re not an island between Europe and America. We’re simply economically dependent on the European Union to where 80 percent of our exports go; thus, we can’t remain outside of European politics. With the exception of Great Britain, all other countries will join the budgetary union and we can’t be the only one to stay out in isolation,” he added.

By clearly stating its readiness to support for EU budgetary integration, TOP 09 — the second largest of the three ruling coalition parties — has effectively thrown down the gauntlet to its larger coalition partner, the Civic Democrats, and waved a red flag in the face of Klaus.

PM undecided

The Czech prime minister, meanwhile, appears to be resolved not to adopt any position on the budgetary and fiscal integration before the terms of the agreement are finalized. “It depends what will eventually be in the agreement, and [the terms] are changing with every hour and I don’t want to make any forceful statements. There is of course the alternative that if the conditions are unacceptable for us we will not sign up the agreement,” Nečas told LN.

ODS deputy leader Pavel Drobil provided a less diplomatic response. “As far as I know, the agreement and its text are not yet ready. Therefore, those who threaten to quit the government if it is not adopted are at the same time saying that they will even sign a blank piece on which the fiscal union agreement will be written and don’t care what France or Germany will write on it later,” Dobil told parlamentnilisty.cz.

MEP for the Civic Democrats and chairman of the European Conservatives and Reformists group in the European Parliament Jan Zahradil alleges TOP 09 is planning to bring down the coalition and form an alliance with the main opposition party, the Social Democrats (ČSSD).

Pretext to topple coalition

There is certainly no love lost between Klaus and Schwarzenberg, who intends to stand for the presidential post and replace Klaus “[Schwarzenberg’s ultimatum] only serves to confirm the fears that TOP 09 is just looking for a pretext to bring down this government and begin to build a ‘pro-Europe’ alliance with the ČSSD. We have been receiving these signals for a while now and the more they deny it, the more likely it is,” Zahradil told parlamentnilisty.cz, adding that he believes it is imperative the budgetary integration agreement be valid for eurozone member states only, and that a referendum on whether to join the euro be held in the Czech Republic.

Klaus has been quick to respond to Schwarzenberg’s statement. As confirmed by his spokesman Radim Ochvat, on Wednesday evening the president sent a letter to Nečas informing him that he will refuse to sign any legislation that would relinquish any Czech sovereign powers over budgetary and fiscal policy to the EU.

There is certainly no love lost between Klaus and Schwarzenberg, who intends to stand for the presidential post and replace Klaus when his second presidential mandate ends in March 2013. Recent attacks include Klaus choosing the annual meeting in August of Czech diplomats to harshly criticize foreign policy under Schwarzenberg’s command, which was interpreted as deliberate attempt at personally humiliating the foreign minister.

More recently, Schwarzenberg said it was “absurd” that Klaus oversaw organization of the funeral of former president, Václav Havel, with whom who consistently clashed on a range of issues, and alleged Klaus was using the occasion to as a PR opportunity for himself.

On Thursday morning, Klaus said the following on Czech Radio:

“I’m very perturbed about this and I think I’m not the only one. Issues such as church restitution on the one hand, and the radical, revolutionary next turn in the European Union towards fiscal union on the other hand, are of course issues which inevitably lead to disputes, but I think the disputes must be normal, cultivated and resolved in a normal way, and I as the President of the Czech Republic cannot tolerate one political party threatening to leave the coalition twice in a day and a half – firstly if there is no church restitution, for the second time if the European agreement is not signed. I think It’s now necessary to say very clearly to the party TOP 09 and to Mr. Schwarzenberg in particular that politics simply cannot be conducted this way.”

Statements in recent weeks and months by Schwarzenberg and finance minister Kalousek certainly haven’t presented their party as a bastion of support for the financial and fiscal integration.If the coalition government does eventually agree to fiscal integration, Klaus could stall the passing into law of the necessary national legislation until the end of his presidency because the Czech Constitution does not specify the timeframe within which the president is obliged to sign or reject legislation.

Although the details of the agreement on budgetary and fiscal integration have yet to be completed, key measures to be included are that signatory countries — at present all member states with the exception of the UK, and potentially Hungary and the Czech Republic, are expected to sign — will commit to not allowing their overall national debt to breach 60 percent of GDP, and that annual budget deficits will not exceed 3 percent of GDP. As yet unnspecified penalties to be imposed by the European Court of Justice in Luxemburg are foreseen for failure to comply.

The agreement is also expected to oblige governments to send their draft annual budgets to the European Commission for approval before being put to national legislatures.

It is well known that there are fundamental differences of opinion over signing up to fiscal integration within the ODS. However, statements in recent weeks and months by Schwarzenberg and Finance Minister Miroslav Kalousek, the deputy TOP 09 leader, certainly haven’t presented their party as a bastion of support for the financial and fiscal integration. Only recently, for example, Kalousek said he could not imagine sending the draft budget to Brussels for approval.

Following Wednesday’s cabinet meeting, Kalousek in contrast to Schwarzenberg delivered a conciliatory message: “Today the debate just started, and we should conclude it next week. I’m convinced that we’ll manage to find a joint government position with which the prime minister will go the next EU summit,” he said. The finance minister is also extremely reluctant to provide more money to the IMF to replenish the euro bailout fund – the European Financial Stabilization Mechanism (EFSM).  

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