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O 171434Z OCT 07
FM AMEMBASSY PRAGUE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9719
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 03 PRAGUE 001153 
 
SIPDIS 
 
SIPDIS 
 
EUR/NCE FOR TRATENSEK 
 
E.O. 12958: N/A 
TAGS: PGOV PREL EZ
SUBJECT:  CZECH POLITICAL DEJA VU:  KLAUS, CORRUPTION, AND BACKROOM 
DEALS 
 
REF:  PRAGUE 973 
 
THIS CABLE IS SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT 
ACCORDINGLY. 
 
¶1.  (SBU) Summary:  The "cucumber season," as the slow summer season 
is known in Czech politics, has come to an abrupt end with new 
allegations of high-level corruption, as well as rising tensions 
within the Green Party - and to a certain extent the coalition - 
after the firing of one of the Greens' ministers.  Early jockeying 
for the upcoming presidential election also added a few weeks' worth 
of drama in September, but the drama seems to have a foregone 
conclusion:  the reelection of President Vaclav Klaus.  While 
relations between PM Topolanek and CSSD leader Paroubek remain as 
sour as ever, both appear to be inching toward some version of a 
political cease-fire.  A deal between the two could bring Paroubek 
the coveted speaker's chair in the lower house of the Czech 
parliament, in exchange for CSSD acquiescence - rather than outright 
support - to ODS priorities like further reforms, missile defense, 
and smooth EU presidency in 2009.  End Summary. 
 
Three Prime Ministers Under Scrutiny 
------------------------------------ 
 
¶2.  (SBU) In the past few weeks, Czech political circles have been 
seized with stories about questionable financial dealings of several 
leaders in both major parties, ODS and CSSD.  PM Topolanek has been 
in the headlines because of the less than transparent arrangements 
concerning a Volvo SUV, which he has been seen driving for well over 
a year.  After initial obfuscations, Topolanek revealed that he had 
borrowed the car initially and that his partner, Lucie Talmanova 
(ODS, Deputy Speaker of the lower house of the parliament), bought 
the car in the summer.  Unsatisfied with this explanation, Czech 
media continued to pursue "Volvogate" for several weeks, especially 
given the apparent involvement of Marek Dalik, Topolanek's 
ubiquitous and unofficial adviser, fixer, and the current eminence 
grise of ODS politics.  While the controversy is unlikely to weaken 
Topolanek significantly, it has sapped some of the momentum he 
gained from the passage of the reform package in August (reftel). 
It has also derailed his efforts to patch up his relations with the 
Czech press, which began in early September with regularly scheduled 
press conferences and even chocolates being distributed to the press 
corps.  The chocolates have since disappeared, only to be replaced 
by invectives and accusations from Topolanek that the press was 
vindictive, corrupt, and Paroubek's attack dogs. 
 
¶3.  (SBU) In the meantime, CSSD has faced its own share of probing 
questions regarding the less than transparent finances of its two 
former prime ministers and party leaders - Jiri Paroubek and 
Stanislav Gross.   Paroubek's personal income became an issue 
because his basic salary as a deputy in the Czech parliament barely 
seems to cover his home loans, car payments, and living expenses. 
The story continues to be fueled by Paroubek's creative accounting 
and explanations, some of them contradictory.  At one point, 
Paroubek's CSSD colleagues even offered to open up their party's 
coffers to help out their chairman with living expenses.  Paroubek, 
however, rejected the offer, realizing that such an arrangement 
would only add to the media and public criticism. 
 
¶4.  (SBU) Topolanek and Paroubek's problems, however, pale in 
comparison to those of Stanislav Gross, who was forced to step down 
as prime minister in 2005 over corruption allegations.  Gross, who 
has worked for a law firm over the past two years, has apparently 
failed to learn from his ignoble departure from high-level politics. 
 A public and political furor erupted over his acquisition and a 
quick sale of shares of Moravia Energo, a Czech energy company.  The 
deal reportedly netted him over 100 million KC (over USD 5 million). 
  Gross has been unable to explain satisfactorily his new-found 
wealth, and his investing activities are now being investigated by 
the anti-corruption unit of the Czech police.  Gross' CSSD 
colleagues have been busy distancing themselves from their former 
chairman and prime minister, but the incident will undoubtedly 
impede CSSD's efforts to portray itself as the party that represents 
and protects the interests of the common people.  (Comment:  It is 
encouraging that the Czech press has pursued the three prime 
ministers' stories with such energy.  Corruption in Czech politics 
is consistently cited by the Czech public as an issue of significant 
concern.  The increased press scrutiny, although an imperfect 
deterrent, should at the very least put Czech politicians on notice. 
 End Comment.) 
 
The Greens' Short-lived Rebellion 
---------------------------------- 
 
¶5. (SBU) The early October departure from the cabinet of Education 
Minister Dana Kuchtova precipitated a public war of words between 
the different factions within the Green Party (SZ), but proved to be 
no real threat to the current coalition.  Kuchtova, who is a popular 
leader within the SZ, resigned under pressure from PM Topolanek and 
others in the coalition principally because she failed to submit an 
 
PRAGUE 00001153  002 OF 003 
 
 
acceptable program for EU funding of Czech education and research. 
However, as Kuchtova's supporters within the SZ would correctly 
point out, she could not have been forced out without SZ Chairman 
Martin Bursik's acquiescence and her record with regard to securing 
EU funding was no worse than that of other ministers.  While true, 
these contentions did not take into account the fact that the 
Ministry of Education was being mismanaged under Kuchtova to the 
point of losing a number of managers and experts in various fields, 
including those with experience in securing and administering EU 
funds. 
 
¶6.  (SBU) While the SZ rebels initially called for the party to 
leave the coalition, the party's mini-rebellion ended with little 
more than an airing of the Greens' dirty laundry.  At the October 
6-7 meeting of the party's executive committee, Bursik managed to 
reassert control over his restive, leftist base, and secured 
continued participation of the SZ in Topolanek's coalition 
government.  Bursik publicly warned that if the SZ were to leave the 
government, the ODS could turn to CSSD and form a grand coalition or 
repeat the opposition agreement of the late 1990's, which most 
Czechs remember as the heyday of political corruption and backroom 
deals.  A grand coalition or a similar arrangement between the ODS 
and CSSD could also agree to change the country's electoral rules to 
the disadvantage of smaller parties like the SZ.  Such arguments 
helped Bursik quell the rebellion and push back against arguments 
from some within his party that he wants to stay in the coalition 
because he is enamored with the perquisites of power and not because 
he wants to push the SZ agenda. 
 
¶7.  (SBU) Nevertheless, it is not clear that Bursik emerged stronger 
from this fight.  Some commentators have observed that the constant 
infighting within the SZ weakens the position of their party's 
leaders in the coalition.  They point to KDU-CSL, the other small 
party in the coalition, which has stood firmly behind its chairman, 
Jiri Cunek, who continues to face corruption allegations and who has 
also been a less than stellar Minister for Regional Development. 
With his party's backing, Cunek has therefore been safe from serious 
pressures within the coalition.  Bursik has no such luxury, but some 
speculate that he has been successful at channeling the pressure 
from within the coalition to beat back the more militant wing of the 
SZ.  While Bursik has again demonstrated that he continues to have 
the majority of the SZ behind him, periodic challenges against his 
leadership will persist.  Since this is the SZ's first stint in 
government and parliament, many of its members are still learning 
the art of governing and of compromising within a coalition. 
 
Presidential Election Already Decided? 
-------------------------------------- 
 
¶8.  (SBU) The upcoming presidential election, due to be held in 
February - March 2008, is beginning to look more and more like a 
slam dunk for Vaclav Klaus.  While the parties opposing Klaus' 
reelection have floated various names of potential candidates, most 
of those thus honored quickly withdrew from consideration. 
Prospective "anti-Klauses," as they were dubbed in the press, simply 
understood that without solid support from the other four parties in 
the parliament, they would not get far.  The possible entry into the 
race of the SZ-proposed Jan Svejnar, a prominent economist and 
professor at the University of Michigan, may make the election at 
least slightly competitive.  CSSD's Paroubek embraced Svejnar last 
week, after initially rejecting him.  The fact that Paroubek failed 
to find a solid candidate of his own probably prompted this about 
face.  However, gaining support from KSCM and KDU-CSL will be 
difficult for Svejnar, as Klaus has been carefully cultivating 
support within those parties for quite some time. 
 
¶9. (SBU) With so little competition, Klaus is almost a shoe-in, and 
as a result, ODS may not need to expend too much political - and 
other - capital to secure Klaus' reelection.  Given the long-running 
tensions between Topolanek and Klaus, having Klaus back in the 
castle may not necessarily represent Topolanek's dream come true, 
but in this case he has very little choice.  According to prominent 
ODS members, if Klaus were to lose his bid for the presidency, 
Topolanek in turn would lose the confidence of many Klaus loyalists 
who remain in the ODS.  As a result, Topolanek would probably not 
survive as ODS chairman and prime minister.  However, even with 
Klaus' reelection, Topolanek's future as prime minister is by no 
means assured.  Many speculate that in a time of crisis, Klaus would 
turn to the current Prague mayor, Pavel Bem, to take over the reins 
of government. 
 
CSSD and ODS Rapprochement 
-------------------------- 
 
¶10.  (SBU) What appeared to be a shaky coalition in the early months 
of its existence, has now stabilized and has even yielded the 
passage of a tax and public finance reform bill that, although 
controversial, has fulfilled a key plank in the ODS political 
program.  While Topolanek has thus managed to shore up his position 
within the coalition and the ODS, Paroubek does not even control the 
 
PRAGUE 00001153  003 OF 003 
 
 
levers of power usually reserved for the head of the opposition and 
chair of the second strongest party in the parliament.  The 
speaker's chair in the Lower Chamber has been occupied by CSSD's 
Miloslav Vlcek largely because Paroubek overplayed his hand during 
the negotiations following the inconclusive elections of June 2006. 
Vlcek, whom Paroubek envisioned merely as a placeholder, has shown 
no intention of vacating the job in favor of Paroubek.  Even if 
Vlcek would agree to go, Paroubek would need the support not only of 
his CSSD and KSCM, but also of a few MPs from the other side of 
aisle. 
 
¶11. (SBU) Paroubek has signaled that he is willing to bargain for 
this support, offering the Topolanek government a cease-fire before 
and during the Czech presidency of the EU in the first half of 2009. 
 Such a deal could ultimately include more than just CSSD 
cooperation on a smooth EU presidency, but also missile defense 
(MD), for example.  The MD agreements' passage through the 
parliament will most likely depend on some level of support from 
Paroubek's CSSD, since the ODS cannot count on full support from its 
coalition partners.  As unlikely partners as Paroubek and Topolanek 
may appear, Czech politics has made for stranger bedfellows in the 
past, so a deal between the two rivals is not unlikely.  A 
well-placed Czech senator recently told us that "Paroubek is a 
businessman and he will listen" to an appropriate offer from 
Topolanek. 
 
Comment 
------- 
 
¶12. (SBU) As the CSSD-led coalition government showed during the 
period 2002-2006, even a coalition with a razor-thin margin in the 
parliament can survive and govern.  Topolanek's three-party 
coalition seems to be gelling into a more coherent group, although 
many of the internal tensions remain and will erupt periodically, as 
they have with Kuchtova's firing.  The Greens will continue to be 
the weakest link in the coalition because of their internal 
divisions, but also because of their rather serious programmatic 
differences with the general ODS direction, whether it be on defense 
policy issues such as MD or energy. 
 
¶13. (SBU) Therefore, Topolanek will probably need help not just from 
the two CSSD renegades who have kept his government in power, but 
also from others in Paroubek's party.  Paroubek is ready to deal, as 
the trial balloon he floated early in October demonstrates.  That 
Topolanek did not reject the offer out right may signal that he is 
open to explore the possibility.  Topolanek would also now be 
negotiating from a better position.  He managed to keep the 
coalition together through the uncertain early months and then 
during the controversial tax and public finance reforms.  Despite 
the occasional Green wobble, we therefore expect the coalition to 
survive at least through the Czech EU presidency in 2009.  Paroubek 
clearly shares this expectation since the proposed deal was billed 
as something that would give the government the necessary political 
space to undertake a successful EU presidency. 
 
¶14. (SBU) In addition to the EU presidency and the parliamentary 
vote on missile defense, which we now anticipate sometime in the 
spring 2008, the Topolanek government will face several other 
challenges in the near term, including votes on the budget and 
foreign deployments.  We expect that Topolanek will be able to push 
these through the parliament even without a prior deal with 
Paroubek.  However, some arrangement will be required before the 
missile defense vote.  What will be key for Czech politics is to 
what extent the possible deal will aim at constructive cooperation 
on important foreign policy issues facing the Czech Republic rather 
than becoming another step backward with regard to government 
transparency and accountability. 
 
GRABER