The fall of the Czech government is coming at a very unfortunate time, not only for us, but this time also for all of Europe and even for the entire world. The government collapsed in the middle of the Czech presidency of the European Union and at a time when it needs to push through anti-crisis measures in the parliament and come up with new ones.
Klaus presidnecy
Let’s take a look at the European level first. Europe is getting ready for the key G20 summit, but that of course is not the end. The global economy is falling into the worst crisis since World War II, and the impact on Europe will be worse than elsewhere in the world. Strong social (and subsequently political) impacts of the crisis will come in the summer at the earliest and then in the autumn. Not that Europe necessarily needed to spend more in its fight with the crisis than the allowance payments set by the law, but it has to get ready for the worst and therefore to have a vision, a strategy and a tactic, to coordinate the methods and objectives. An EU presidency that is not backed by its national parliament would be limited to merely mediating talks and hosting indecisively without having one’s own opinion.
What is much worse is the idea that someone would take over the presidency on the fly, and the vision that it could be Europhobes like Klaus type is terrifying.
(There is no direct link to the crisis here, but it is apparent already now that the Czech Republic did not help small and mid-sized countries at all. Given how the foreign press reacted to the government’s fall and to Topolánek’s speech in Strasbourg, the Czech and Swedish presidencies will be the last ones to have the current shape if the Lisbon Treaty is passed. The role of the rotating presidency will weaken significantly to the benefit of a permanent presidency.)
From the middle to the edge
If the Lisbon Treaty is not approved or its ratification in the Senate is postponed until the autumn of 2010 as a result of the political crisis in the Czech Republic, it would bring very negative economic impacts as well. Because there is an obvious trend to have a two-speed Europe, which is promoted especially by France: it would like a faster and deeper integration in the eurozone, which should have its own institutions. Until now Germany has been France’s strong opponent in this respect and de facto the Czech Republic’s ally. But if it is us to let the Lisbon Treaty fall, then it can happen that Germany joins France. And we would be on the periphery of Europe not only politically, but also in terms of business and investment of course.
Lumped together
The Czech government (as well as other institutions like the crisis council NERV and the central bank) have recently tried hard to make the world distinguish between the Czech Republic and the central and eastern European region. The media that made most mistakes (The Economist and Financial Times) have even started to take the difference into account. There is a geopolitical and economic logic in that: The Czech Republic is a member of NATO, EU, OECD and who knows what else and is situated west of Vienna.
But the Czech economy really has completely different parameters and fundamentals than the rest of the region. We don’t have any mortgages in foreign currencies, the Czech banking sector is a creditor of foreign institutions and of its parent companies (not the other way round), we have a very good level of household deposits in banks and, unlike many other countries in the region, a relatively very low deficit and total debt.
But what happened after the government collapsed? The Czech Republic is again compared by many to Hungary or even to the Baltic countries. The Hungarian PM is leaving, the Czech PM is leaving. Political instability hits CEE countries (including the Czech Republic) as a result of the economic crisis. But of course only few care whether or not the Czech government fell owing to the economic crisis or for completely different reasons (political leaders having personal grudge against one another). So we will again pay for it (at least for a while) with an outflow of investment and currency destabilisation. And maybe it won’t be for a while because we are apparently going to see a period of tense political instability.
Forget about the euro
And speaking of economic impacts, we should not forget the euro. Poland has recently tried hard to enter the eurozone in a special regime. The Czech government (or rather Alexandr Vondra) has recently launched a cautious debate on whether we should take a similar approach. With Václav Klaus’s powers rising, such an idea isn’t new.
There are mixed signals about the global economic development from around the world. If the negative ones prevail, we would face difficult times even without political instability. With the instability, it will be twice as hard.
