Czech President Wins New Term in Boon to Euroskeptic Forces

(Bloomberg) -- Czech President Milos Zeman, an ally of Russian leader Vladimir Putin, won a second term after warning voters that sheltering Muslim immigrants would bring terrorism to a country divided over its place in the European Union.

Zeman, who at 73 was also an early fan of U.S. President Donald Trump, won a weekend runoff for the largely ceremonial post against chemistry professor Jiri Drahos, who campaigned for closer relations with the EU and NATO. The outcome extends an alliance between Zeman and billionaire Prime Minister Andrej Babis, who shares his opposition to accepting refugees and deeper integration with the world’s largest trading bloc.

Zeman’s victory bolsters forces fighting against the EU’s liberal, multi-cultural values, a group that includes Hungarian Prime Minister Viktor Orban and Poland’s ruling Law & Justice Party. While the Czech president holds few formal powers, he has an influential voice in public debates and has fueled an ideological rift among people in a region polarized by issues including the rule of law, immigration and sanctions against Russia.

“It’s almost inevitable that Zeman’s win will be interpreted as a victory for the euroskeptic and more Russia and China-leaning politics,” Otilia Dhand, an analyst at Teneo Intelligence in Brussels, said by phone from Brussels. “It is difficult to put the Czech Republic exactly in the same bag as Poland and Hungary, but the feeling is there that it might be headed in the same direction.”

The Czech Republic boasts one of the EU’s fastest-growing economies, its lowest unemployment and the highest living standards among the bloc’s eastern members. But the election underscored a rift between those reaping the benefits of the post-communist transition toward an economy integrated with richer western neighbors and poorer people who feel the country’s success has passed them by.

Zeman’s critics say his efforts to strengthen ties with Russia and China have undermined Czech relations with their western allies. The veteran politician rejects the idea, saying he’s trying to help exporters whose goods underpin the economy.

Zeman’s re-election also gives him an influential role in Babis’s efforts to build another cabinet. After the billionaire’s minority administration was forced to resign when lawmakers rejected it in a confidence motion this month, Zeman pledged to give him more time to negotiate support before naming him premier again.

QuickTake Q&A on Zeman’s political vies and his support for Putin

The complicated political situation has had limited impact on Czech assets as investors focus mainly on prospects for more interest-rate hikes. The koruna strengthened 0.1 percent to 25.299 per euro as of 8:30 a.m. on Monday, extending this year’s gain to 1 percent.

Babis, who backed the president in the election, is in a delicate position: mainstream parties refuse to back him as long as he’s facing a fraud investigation linked to EU funds. The billionaire, who denies any wrongdoing, will remain in power in a caretaker role until the president names a new cabinet. Zeman has no deadline and in the past has used what he calls a “creative interpretation” of the constitution to keep a technocrat cabinet in power for months without parliamentary approval.

“Zeman could have huge influence on the makeup of the government,” said Josef Mlejnek, a political scientist from Charles University in Prague. “If he forces Babis’s government to be less pro-European, the Czech Republic’s position in Brussels could become more problematic.”

©2018 Bloomberg L.P.

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