Czech coalition divided over referendum on new EU budget rules

The Czech government provisionally committed on Wednesday to holding a referendum on whether to sign up to the European Union’s new budget and fiscal agreement, despite opposition from TOP 09, a junior party in the center-right coalition. A definitive decision will be taken when the exact terms of the treaty are finalized. The government also discussed providing a loan to the International Monetary Fund (IMF) but no decision was reached.

The largest party in the governing coalition, the Civic Democrats (ODS), and the smallest, Public Affairs (VV) outvoted TOP 09, to provisionally endorse putting the EU budget agreement to the Czech electorate. “If the government decides, all members [of the coalition] are bound to support its position,” Prime Minister Petr Nečas (ODS) told reporters after Wednesday’s cabinet meeting.

At their annual party conference last autumn, the Civic Democrats agreed to hold a referendum on adopting the euro, though no date was set, nor is adopting the common currency among its policies.

Disagreement on sovereignty and mutual agreement

Finance Miroslav Kalousek opposes a referendum on the grounds that the issue is too complex for the general public  Under the agreement signed by the coalition members upon formation of the government in the summer of 2010, any transfer of sovereign powers to the EU must be put to the Czech electorate in a referendum.    

Finance Minister Miroslav Kalousek, TOP 09’s deputy chairman, opposes a referendum on whether to sign up to the new EU budgetary agreement on the grounds that the issue is too complex for the general public; even wording the referendum so as to put a “yes” or “no” decision to the electorate would be problematic, he has said.

TOP 09 also claims that under the terms of the draft EU budget agreement there would be no such transfer of sovereign power to the EU. One party deputy, chairman of the lower house of Parliament’s public administration committee Stanislav Polčák, claims the coalition agreement even rules out holding a referendum on the issue. “In the coalition agreement there are restrictions on calling a referendum and therein it is precisely stated that there are serious issues that, according to international practice, cannot be voted on in a referendum; the list of such issues includes financial and taxation issues which shouldn’t be put to a referendum,” Polčák told Czech Television (ČT) on Wednesday.

TOP 09 also claims their stance on the new EU agreement stems from the party’s desire to conduct a consistent foreign policy. “The Lisbon Treaty to a significant extent shifted [sovereign] competences towards the EU institutions, nevertheless, at the time Czech politicians rejected holding a referendum,” Kalousek told reporters Wednesday.

Fundamental differences in approach to EU

Last week, TOP 09 leader and Minister of Foreign Affairs Karel Schwarzenberg said in an interview with the daily Lidové noviny that it was essential for the Czech Republic to be at the core of the movement towards further integration of the EU, and that TOP 09 was positioning itself as a pro-EU, pro-integration party. “I won’t sit in a government that leads the Czech Republic out of the mainstream of European integration,” Schwarzenberg said.

In its position on the EU, TOP 09 is closer to the main opposition center-left  Social Democrats (ČSSD) — who favor adopting the euro and are also opposed to a referendum on the issue — than it is to its two coalition partners.       

The prime minister said analysis of the Constitution concluded that the government would require exceptional authorization from the Czech President, Václav KlausAt a press conference following Wednesday’s Cabinet meeting, PM Nečas said that in the majority view of the government, the provisions of the draft treaty — including giving extra powers to the European Commission to intervene in national budgets and for the European Court of Justice in Luxembourg to impose fines on states that fail to apply the new fiscal rules — would represent a relinquishment of sovereign powers.  

“According to the [coalition] government agreement, the government is bound to resolve the issue with a referendum, but this does not mean that if the government does decide to sign up to the agreement that a referendum will be held,” Nečas said. “In the event that we join the agreement, I would personally favor a referendum on the whole complex of agreements that we would have to adopt in order to enter the eurozone.” 

Nečas also said that analysis of the Constitution showed the government would need exceptional authorization from President Václav Klaus to sign up to the agrееment — precisely because it would entail a relinquishment of a degree of national sovereignty. Last week, the famously euroskeptic Klaus sent a letter to the prime minister stating that under no circumstances would he consent to it.

Among other conditions, countries who sign up to the agreement will commit to limiting state budget deficits to a maximum of 3 percent of GDP, not allowing overall national debt to breach 60 percent, and submitting draft budgets to the European Commission for approval before adoption. Signatories will also have to clear planned emissions of state bonds with the EU institutions.

The EU’s finance ministers are expected to finalize details of the budget discipline agreement in Brussels next week in time for last-minute adjustments and ratification by the leaders of the participating states on January 30.

No commitment on IMF loan

The Czech government did not decide Wednesday whether or not to provide a loan to the IMF to help top up the euro emergency bailout found, the European Financial Stabilization Mechanism (EFSM). Nečas stressed that all responsibility for a decision on the loan will be carried by the government, not the board of the Czech National Bank (ČNB), and it was agreed that Kalousek would present a detailed proposal to the government next week.

The prime minister did, however, say that following consultations with the central bank’s board (and ČNB vice governor Vladimír Tomšík attended Wedsnesday’s Cabinet session) it was “absolutely out of the question” that the Czech Republic would provide the full €3.5 billion (around Kč 90 billion) requested by by the IMF, adding that the sum would be “very considerably lower” — if provided at all.