Czech Tycoon's Ruling Plan Collapses as Deadlock Persists

(Bloomberg) -- Czech billionaire Andrej Babis failed to reach an agreement to form a coalition government with the Social Democratic Party, extending a political deadlock more than five months after he won parliamentary elections.

Falling short of a majority in the October ballot, Babis is seeking to secure enough backing to transition from his role of caretaker prime minister even as he fights a fraud probe and conflict-of-interest allegations. He’s also trying to build ties with other European Union leaders, while fending off comparisons with Hungarian Premier Viktor Orban and Polish ruling-party head Jaroslaw Kaczynski, with whom he shares some euroskeptic and anti-immigrant views.

After several weeks of negotiations brought a consensus on agenda goals, talks between Babis’s ANO party and the Social Democrats fell through in the final round late Thursday over a disagreement about the division of cabinet posts. The Social Democrats were demanding that Babis stay out of the cabinet as long as the fraud investigation is ongoing, which the billionaire rejected. While ANO was offering to give up five ministries, it refused to cede control of the Interior Ministry, which the Social Democrats requested.

“Our movement showed great flexibility and tolerance,” Babis told a news conference. “I don’t understand this, the difference in elections was 22 percent.”

With mainstream parties refusing to support Babis’s administration, the second-richest Czech could try to negotiate backing from the Communists and the far-right SPD party, an anti-Muslim group advocating for the country to follow the U.K. out of the EU. But Babis told the Pravo newspaper that he isn’t negotiating with SPD and that early elections were one option to end the stalemate.

The billionaire said he’d seek a meeting with President Milos Zeman, his ally who’s repeatedly spoken against a snap ballot. While the two men share anti-migrant views, they’ve disagreed over the expulsion of Russian diplomats. The president has the sole right to name the prime minister.

Read more about president Milos Zeman’s influence over government talks

Lengthy coalition building is a tradition following Czech elections. Because of a system that usually results in five or more parties entering parliament -- without one having a majority -- the post-communist nation of 10.6 million people frequently struggles with unstable governments and has had six in the past decade.

But the volatile politics have rarely caused major disruptions in the economy because of the country’s close links with its largest trading partner, Germany.

Even if Babis, the nation’s most-popular political leader, ran out of options and wanted fresh parliamentary elections, it may be difficult to convince 120 lawmakers to approve them, according to Lubomir Kopecek, an analyst at Masaryk University.

“It’s questionable whether the lower house will be able to agree on early elections, given how fragmented it is and given that most parties wouldn’t benefit,” Kopecek said on public television. “I’d expect protracted negotiations, and the next developments are very uncertain.”

--With assistance from Krystof Chamonikolas

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net.

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Andrew Langley, Paul Abelsky

©2018 Bloomberg L.P.