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Grayling Political Digest, April 2018

27th April 2018

The ever-elusive mirage of governance

It has been over 180 days since the parliamentary election, yet the Czech Republic still has no government capable of winning a vote of confidence in the Chamber of Deputies. We are fully aware how painful it must be for our stakeholders to see the political agenda pinging back and forth, and sometimes even drawing circles, as may have seemed the case over the past few weeks.

Following the collapse of negotiations between the ANO movement and the Social Democrats, and in the wake of a sit-down meeting between PM Andrej Babiš and the president, negotiations have started once again. Mr Babiš seems to be caught between a rock and a hard place as his options are limited. On the one hand, there is the prospect of a coalition government with the Social Democratic Party, but this would rely on support from the Communist Party, for the first time in the 29 years since the Velvet Revolution. His other choice is to cooperate with the anti-immigrant, anti-EU far-right extremist party led by Tokyo-born Tomio Okamura.

What is more, Mr Babiš must also extinguish some internal fires. The latest include the involvement of his right-hand man, Mr Faltýnek, in a potential scandal regarding deals in the transport sector, and the fall from grace of the infamous Mayor of Prague, Mrs Adriana Krnáčová.

This last incident has been particularly spectacular, because a few weeks ago Mrs Krnáčová announced her resignation, but her reign will continue until the upcoming municipal elections in autumn 2018. Over the past few days there has been a flurry of issues with transportation in the Czech capital, which is being knocked by one scandal after another. The overall situation is best described by a quote from the soon-to-be former queen of Prague: “The assumption that the mayor can make certain arrangements is misplaced.” Krnáčová out.


More snacks?

Everybody likes snacks, no doubt about that, but the FMCG sector is one of the most stringently regulated industries and is frequently faced with communication crises. At the beginning of 2017, the infamous decree banning junk food from being sold at schools came into effect, but now, just one government change down the line, we can clearly see a groundswell of opinion seeking to abolish the legislation.

Even though the current government has tendered its resignation, we cannot preclude the possibility of an ANO led government. Not long ago, even the Minister of Youth, Education and Sports, Mr Robert Plaga, admitted there were plans to review this legislation. The general public is polarised, with a significant number of schools that would welcome the revocation of this regulation.


Credits will not do fine  

This is clearly not another epic made-up sequel from a long time ago in a galaxy far, far away, but unfortunately a reality in a European country very close. In the past, the Czech Republic has been one of the worst countries when it comes to the use of EU funds. Sadly, the latest information on the operational programme managed by the Ministry of Industry and Trade indicates that this still holds true.

The European Commission has suspended the Operational Programme Enterprise and Innovation for Competitiveness, a move that has jeopardised many companies relying on these subsidies for their projects. Specifically, companies from the ICT sector will lose funding altogether and most of them are weighing up their next steps, which understandably include legal action against Czech authorities. This is yet another addition to the plethora of crises at the Ministry, which has failed to deliver on multiple fronts e.g. the NGA network subsidies and the Lithium case.

Grayling Team

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