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HN: Two major Czech parties rely on single financial source

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Prague, Nov 1 (CTK) – Each of the two major Czech parties, the Social Democrats (CSSD) of PM Bohuslav Sobotka and the ANO movement of Finance Minister Andrej Babis, is extremely dependent on a single financial source that has its own interests, David Klimes writes in daily Hospodarske noviny (HN) on Tuesday.

ANO has been receiving money from its leader, billionaire Babis, who owns the giant Agrofert holding, while the CSSD owes a lot of money to the Czech Fio banka bank, he says.

The Social Democrats took a loan of 220 million crowns from Fio banka three years ago and the bank promised to loan them further 338 million earlier this year so that the party can pay this very high sum due to a court dispute that it is likely to lose, Klimes writes.

He says there have been cases of Czech parties that failed to cope with their financial problems since the 1990s. After the 2010 general election, the Civic Democratic Party (now junior opposition ODS) had a bank overdraft due to its bad election result and the Christian Democrats (KDU-CSL) did not enter parliament for the first time and they were nearly forced to sell their headquarters because of their debts, Klimes writes.

Yet the cases of the CSSD and ANO are exceptional, he says.

The CSSD will not be facing bankruptcy thanks to its buildings that belonged to its predecessor, the Czechoslovak socialist democratic party, and are worth more that 600 million crowns. If the CSSD did not own the real estate, it would probably not have been offered such a high loan, Klimes writes.

It is paradoxical that CSSD’s large Prague headquarters, Lidovy dum, was returned to the party in 2000 thanks to lawyer Zdenek Altner who is the party’s biggest problem now: in March 2016, a court issued a verdict ordering the CSSD to pay Altner about 18.5 million crowns for his services in the 1990s plus the contractual fine of 318 million, Klimes writes.

The CSSD appealed against the verdict and it is waiting for the Supreme Court to decide on the case, he says.

Moreover, the Social Democrats owe 159 million crowns to their own company Cil, according to their latest financial report, Klimes writes.

He says the CSSD is not able to quickly pay such huge debt: in 2015 it lowered its debt by only 30 million crowns. The party relies mainly on state contributions for the number of political mandates it wins in elections. Since ANO is becoming more popular at the expense of the Social Democrats, their payments from the state have been decreasing. For the recent regional elections, the CSSD will get 31 million crowns a year from the state, while ANO will get 44 million, Klimes writes.

Of course, the CSSD loan from Fio banka is a risk. Sobotka is prime minister and the owners of the bank have other businesses. One of them, Romuald Kopun, owns a fruit-growing empire and his orchards were badly damaged by frost last spring. In May, Sobotka all of a sudden promised financial support for wine growers and fruit growers, but wine growers were later forgotten. In August, the government decided that the afflicted fruit growers will receive 133 million crowns from the state in compensation, Klimes writes.

It may not be apparent at first sight how dependent ANO is on Babis. ANO’s annual report shows that the party made a profit of 27 million crowns, but at the same time it owed 37.5 million to Babis, Klimes writes.

Thanks to its very good election results, ANO gains more money from the state and is getting less dependent on Babis. Firms that are part of Agrofert holding do not have to make high donations to prevent ANO from running into debts anymore, Klimes writes.

In 2014, ANO received the highest donation from Deza, a firm processing raw tar and benzole, from the Agrofert holding. At present, the biggest sponsors are companies that Babis does not control through his shares, Klimes writes.

However, ANO probably would not financially survive if Babis left it, he adds.

Klimes says the millions that Agrofert subsidiaries sent to ANO are very small sums in comparison to Agrofert’s profits. The holding increased its profit by 40 percent, from 6.1 billion crowns in 2014 to 8.6 billion in 2015.

The Czech state definitely does not harm Agrofert’s business. On the contrary, state financial support to biofuels was extended and other laws advantageous for the holding were approved after early 2014 when Babis was appointed finance minister, Klimes writes.

The new law on transparent financing of election campaigns is a step forward, but it does not solve the biggest problem of domestic politics – the privatisation of the only two big Czech parties. The rules for the funding of political parties have finally been introduced, but solvent parties are still needed, Klimes says.

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