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Another Czech political storm brewing

The Czech ruling coalition and the opposition Social Democrats (CSSD) have engaged in a new political battle that may prompt the CSSD to initiate a vote of no-confidence in the government. The latest conflict has been triggered by the government's decision to omit from a report to the parliament on privatizing four largest banks in the country the privatization of the Postovni a Investicni Banka (IPB), the fourth largest bank in the Czech Republic.

The government promised to consult the planned privatization of the largest banks with the parliament in June before the vote of confidence, which it narrowly won. The pledge was given at the request of former CSSD deputy Jozef Wagner, whose vote in the end saved the government. The government now says that it had already begun working on the privatization of the IPB last November, long before the confidence vote, and the pledge therefore does not apply to it.

The government has decided to sell the IPB to the Japanese investment bank Nomura. On 20 August, the government approved a report from Finance Minister Ivan Pilip about how it would proceed in the sale of the state stakes in three other largest commercial banks--Ceska sporitelna, Komercni banka and Ceskoslovenska obchodni banka. The report has been sent to the parliament.

The row over the IPB is only the latest in a series of intensifying conflicts between the CSSD and the ruling coalition. It is certain that if the CSSD does not succeed in bringing the government down over the IPB privatization scheme it will use other opportunities--for example, the upcoming debate in the parliament of the state budget for 1998.

Political analysts suggest that the CSSD does not have enough votes to bring the government down. Unlike in June, when the government itself asked for a vote of confidence (and therefore needed the votes of a simple majority of deputies present at the session in order to survive), the vote of no-confidence requires the support of 101 deputies in the 200-member lower chamber. Deputy Jozef Wagner has already said he does not oppose the government's decision to leave the IPB out of the government's privatization report.

However, the vote will test the coalition's unity. The Christian Democrats (KDU-CSL) have bitterly complained about the sale of the IPB to Nomura. KDU-CSL Chairman Josef Lux said in July, when the government officially approved the sale, that government members had not had enough time to prepare for the decision, as they were handed all supporting documents shortly before the government's session. Prime Minister Vaclav Klaus and Finance Minister Ivan Pilip have argued that the government faced a deadline from Nomura and, therefore, needed to decide quickly.

More important, Lux has complained publicly that the sale of Nomura is disadvantegous to the Czech republic. In his opinion, the price for the IPB--some 6 billion crowns--is too low. Moreover, it can be lowered even more after a an audit.

The IPB has always been considered close to the Klaus's Civic Democratic Party (ODS). Lux recently even accused the IPB that it had financed the money-losing Denni Telegraf daily, which has been staunchly pro-ODS. The IPB owns a number of investment funds which control numerous Czech companies. The government in its two packages of austerity and corrective measures announced in April and May, respectively, said it would prepare a law under which investment funds would be separated from banks. It has failed do so; some analysts have suggested that the reason is that, through the IPB, Nomura is interested in gaining control in many Czech enterprises.

The KDU-CSL will have to balance its unhappiness with the sale of the IPB against its declared resolve to preserve the ruling coalition for a time being. However, it is clear that Lux will find himself in a difficult position. If his party supports the government, he will have to explain why the preservation of the coalition is more important than what he sees as a bad privatization deal that could cost the country billions of crowns.

If he decides to vote against his own government, many voters may accuse his party of causing political instability. Moreover, the KDU-CSL would then have to start seriously thinking about a coalition with the CSSD--something that most KDU-CSL leaders have so far refused.

In threatening the vote of no-confidence, the CSSD is indirectly putting pressure on Lux. If Lux ignores his stated opposition to the IPB deal in favor of upholding a government he frequently criticizes, he may be criticized as being unprincipled. Meanwhile, the CSSD has again stressed that it considers the KDU-CSL as its coalition partner after the next elections, which--it is increasingly likely--may be held in 1998, two years ahead of the next regular poll.

Reuters - 12. 9. 1997