By Jan Lopatka
PRAGUE, Feb 1 (Reuters) - The Czech centre-right coalition
has wobbled unexpectedly in the past two months after an alleged
corruption cover-up and a spying scandal pitched a junior
coalition partner against Prime Minister Petr Necas.
A last-minute agreement averted a break-up of the coalition
in a no-confidence vote on Dec. 21, but the conflict has opened
divisions just as the government needs to speed up work on three
major issues: pension, health and tax reforms. []
The coalition, formed after an election in May, suffered a
setback in October when the opposition centre-left Social
Democrats won a majority in the upper house and said they would
use it to oppose the government's austerity drive.
COALITION STRAINS
The smallest coalition party, the centrist Public Affairs,
fared poorly in October's upper house and municipal elections,
prompting it to take a more aggressive stance.
Tensions came to a head last month when environment minister
Pavel Drobil, a member of Necas's centre-right Civic Democrats,
was forced to quit over allegations that he had covered up
corruption in an infrastructure tender. Drobil denied any
wrongdoing.
Public Affairs, who won parliamentary representation for the
first time last year on pledges to fight corruption, escalated
the scandal by threatening not to support the government in a
no-confidence vote called by the opposition.
A fresh conflict centred on information revealed by a daily
newspaper showing that a detective agency formerly owned by a
senior Public Affairs figure, Transport Minister Vit Barta,
spied on Civic Democrat municipal politicians.
Barta had denied any such activity but later was forced to
admit that it did happen. Necas accepted his apology but
suspicions among the partners remain high.
Ties have also been tense between the Civic Democrats and
the conservative TOP09, its rival for leadership on the
political right.
The three-party coalition still has the strongest majority
in the lower house since the break-up of Czechoslovakia in 1993
with 118 of 200 seats -- a unique chance to push through
reforms.
What to watch:
-- Friction between the Civic Democrats and Finance Minister
Miroslav Kalousek's TOP09 could worsen, possibly over an
environmental cleanup tender. The tender, possibly worth
billions of dollars, has been criticised by Necas but supported
by Kalousek.
-- The new and somewhat unpredictable Public Affairs may
become more volatile as it seeks to reverse its popularity drop.
-- Public Affairs demands that some planned tax hikes and
pension reforms, key items on the government's agenda over the
coming months, should be softened.
-- Tensions within parties. Regional Civic Democrat party
bosses have disobeyed Necas by forming coalitions with the
Social Democrats at municipal level. Analysts see this, and his
appeasing approach to Public Affairs, eroding his standing in
the party.
LABOUR PROTESTS
About 3,800 hospital doctors, about a quarter of the total,
are threatening to quit at the end of February in protest at
their poor pay.
The government has refused to provide funding from the
budget and has been looking for other ways to keep the doctors
working in order to avoid any major reduction in care.
Trade unions held a two-hour public sector strike against
austerity measures on Dec. 8, the biggest protest in years.
Czech unions are weak but may flex more muscle in solidarity
with others in Europe and by making common cause with the
opposition Social Democrats, who got a boost from the Senate
election victory.
What to watch:
-- Given that the government is unlikely to back off its
fiscal reform plans, will state workers' unhappiness lead to
bigger strikes involving workers at private companies, which
have already faced job and wage cuts in the economic crisis?
-- Will doctors carry out their threat, forcing hospitals to
close and endangering health sector reforms?
FRICTION OVER PENSION AND HEALTH REFORMS
The government needs to speed up work on the main reform it
has pledged, of the pension system, if it is to introduce it in
2012, as promised.
Parties have clashed over how much money should be diverted
into private pension funds, and whether this should be
mandatory. [] []
The coalition needs to reach agreement by the spring to give
time for the reform to be approved by parliament.
The other big reforms on the agenda are of the health and
welfare systems.
What to watch:
-- Arguments over plans to raise the 10 percent value-added
tax rate on food, health and social care, accommodation, books,
transport and culture to 19 percent to raise money for pension
reform, which the Public Affairs opposes.
-- Lobbying by the fund industry among political parties may
lead to clashes between parties on policy options.
-- Disagreements over whether pension savings will be
mandatory. Will a state fund be created as well?
- The leftist opposition is using the example of Hungary,
where the government decided to force taxpayers back into the
state pension system from their private pensions amid budget
constraints, to rally public opinion against the reform.
For political risks to watch in other countries, please
double click on []
(Editing by Sonya Hepinstall)
