New Czech coalition deal gridlocks over gaming, tax

The three coalition parties in the center-right Czech coalition failed to finalize a new deal  between  them to keep the government going after nine hours of talks ending late Wednesday. They will now try to seal a last-minute deal on Sunday.

The smallest party in the coalition, Public Affairs (VV), has threatened to walk out of the coalition unless it wins changes to the deal that gave birth to the government following elections in mid-2010. In particular, it wants more Cabinet seats after losing two of its ministers following recent scandals.

Former Transport Minister and de facto VV leader Vít Bárta was forced to resign from his government post after being at the center of a “cash for loyalty” scandal that erupted in April. He was followed out of the government by party chairman Radek John, who was ousted from the sensitive Interior Ministry to become the government’s anti-corruption czar, only to quit the post in protest when Prime Minister Petr Nečas (Civic Democrat, ODS) blocked the appointment of a junior minister.

Progress on Cabinet share-out

VV made some progress on its demands for a better share of Cabinet seats from coalition partners ODS and TOP 09 during Wednesday’s talks. Karolína Peake, the first deputy chairwoman of Public Affairs, is being lined up to join the government as first deputy prime minister, albeit with the less-than-heavyweight position of head of the government’s Legislative Council.

VV is also seeking to get new nominees to head the Transport Ministry (MD) and Ministry for Regional Development (MMR), with lower house lawmakers Lukáš Hampl being expected for the first job and Petr Skokan for the second.

Current Transport Minister Radek Šmerda, while close to VV and his former boss at the ministry, Bárta, has always been regarded as a stand-in appointment. VV’s reigning Minister for Regional Development Kamil Jankovský is distrusted as too close to a faction of former Public Affairs deputies who left the party during  recent scandals that have hammered its public popularity ratings.

But VV’s demands for changes to an already voted law on gambling firms and for a 1 percentage point hike in taxes on companies are still blocking a new coalition deal.

Gambling gridlock

On gambling, VV is calling for the continuation of the current practice where a portion of taxes on gambling companies is channeled into charities and foundations, while its collation partners are backing demand by Finance Minister Miroslav Kalousek (TOP 09) demands that a 20 percent levy on their profits head straight into the state’s coffers. “It is very difficult to agree because VV is sticking to something that is unrealizable,” TOP 09 negotiator Petr Gazdík said.

VV is also pressing for stricter measures against the gambling machines that have invaded many Czech towns and cities. Instead of local councils being able to close down existing operators of traditional one-armed bandits and new video gaming terminals after three years, VV is demanding that they be given only 12-months notice. ODS and TOP 09 politicians warn that this could spark costly arbitration proceedings against the Czech state with gambling companies claiming damages for loss of earnings.

The ODS and TOP have slammed VV’s tax demands, also including a call that taxes on top earners are not cut, as inacceptable. ‘When it comes to important things, the coalition can show that it can act as one.’

Prime Minister Nečas is upbeat that the current coalition will continue beyond VV’s June 30 deadline. Key votes in favor of pension and health reforms in the lower house of Parliament this week were proof the government could function successfully, he said. “When it comes to important things, the coalition can show that it can act as one,” he declared.

Public Affairs now has 21 seats in the lower house, three down after “rebels” quit, but enough to turn the government’s current comfortable majority into a minority and possibly force early elections.