Friday, 18 April 2014

Left wing's election victory may slow down economic reforms

ČTK |
15 October 2012

Prague, Oct 14 (CTK) - The result of the regional and Senate elections, in which left-wing parties won, may cause a slowdown of the government's economic reforms and problems with the control of public budgets but it will not have an immediate impact on financial markets, economists addressed by CTK said.

The result of the elections will have no impact in a short-term horizon. In a longer-term horizon, it will depend on internal development inside the strongest government party, the Civic Democrats (ODS), said UniCredit Bank chief economist Pavel Sobisek.

It remains to be seen whether ODS chairman Prime Minister Petr Necas will defend his leading position and how he will agree with the rebelling deputies. This may cause changes in economic reforms but they will probably have only a partial character, he added.

"The reforms that have already started and on which the state budget for the year 2013 depends cannot be changed much. Either there will be reforms and the state budget or neither of them," Sobisek declared.

The probable left-wing orientation of most regions and their unconstructive relations with the right-wing government may pose a problem for keeping control over public finances, said Patria Finance chief economist David Marek.

In the Senate, the result will probably be rejection of reform bills passed by the Chamber of Deputies, he added.

"For potential external observers, this may be an indicator of the result of parliamentary elections to be held in two years. The support to the left may mean a slowdown in fiscal consolidation, which is a negative signal," Marek pointed out.

If such an election result was seen five years ago, it would have meant a fall on the financial markets and in particular in the crown's rate, said Next Finance director Marketa Sichtarova.

"I do not think that the markets will react to the result in any way. They are completely indifferent to what happens at home and develop according to the movements in the euro zone," she added.

The winners of the regional elections are the Social Democrats (CSSD), ahead of Communists (KSCM) and Civic Democrats (ODS). The first round of the Senate elections resulted in the same way.

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