What is going on in politics in the Czech Republic

Jan Culik

A lecture, given at the Czech day at Glasgow University,

14th March, 1997

Over the past seven years, the Czech Republic has gone through a rather interesting political development. Some might call it a process of disillusionment with politics, other might call it a process of growing up.

When the communist regime fell in November 1989, the reins of power were taken over by Civic Forum, a kind of government of national unity, which was hastily assembled during the weeks of the democratic revolution, mostly from dissidents and other people, in opposition to the communist regime. Dissident playwright V‡clav Havel was elected president in December 1989. In June 1990, the first free general elections took place in Czechoslovakia. They were designed to produce a transitional government, with a mandate lasting only for two years. The 1990 general election was really only an anticommunist plebiscite. There had not been time for proper political parties to form. Thus the elections produced yet another government of the national unity, based on the philosophies of the Civic Forum.

In fact, the 1990 elections produced three parliaments and three governments: a federal parliament and government and two national parliaments and governments. Quite a lot of time after 1990 was spent in controversies between the Czechs and the Slovaks on a number of issues. The proper work of government was more or less deadlocked. Arguments raged for instance whether the name "Czechoslovakia" should be spelled as a single word or whether it should be hyphenated. Thus the general public perhaps gained the impression that the work of the newly elected politicians was not very effective.

The elections in June 1992 radically changed the political scene in Czechoslovakia. In the Czech Republic, the elections were won by a new, ostensibly right wing grouping, the Civic Democratic Party, headed by an ostensibly Thatcherite economist V‡clav Klaus. The Civic Democratic Party emerged from the Civic Forum as a very forthright, matter of fact organisation with a concrete, no beating about the bush privatisation programme. The economist V‡clav Klaus had served as Finance Minister in the 1992 government and was responsible for the preparation of privatisation.

Some commentators have argued that Klaus managed to win the 1992 elections primarily because he was able to bribe the Czech electorate with the promises that they would all get rich on the proceeds of his popular privatisation, the giving the state industrial firms to the populace for free. However, the reasons for Klaus's election victory in 1992 were undoubtedly more complex. Unlike most of the other politicians from the 1992 government, he was very forthright and concrete in his public statements and created the impression of a doer rather than a vacillator.

The Czech media also built up Klaus's image of an experienced specialist, an internationally highly esteemed economist, a possessor of abstruse knowledge which ordinary people could not possibly understand, but which would bring affluence to every Czechoslovak.

The results of the June 1992 general elections in Slovakia were radically different. They brought to power one Vladimir Meciar, a former boxer with left-wing leanings, and his strongly post-communist party, the Movement for Democratic Slovakia, HZDS. The election victory of what was ostensibly the right wing in the Czech Republic and of what was ostensibly the left wing in Slovakia led to the dissolution of Czechoslovakia. The country was split into two on the 1st January, 1993.

Although potentially de stabilising, the break up of Czechoslovakia had one great advantage - the political arena was finally free of constant friction between the Czechs and the Slovaks and politicians could set about doing some real work.

The division of Czechoslovakia had however one rather unfortunate consequence for Czech politics. Prior to the division of the country, there had been to be two parliaments in the Czech Republic. The main chamber was the Federal Parliament. The less important, much more parochial chamber was the national Parliament of the Czech Republic. The more professional and the more intelligent politicians stood in for the elections into the Federal Parliament in 1992. Second and third raters went in for the Czech national assembly. Due to a paradoxical twist of history, when Czechoslovakia was split up, the high quality Federal Parliament was abolished. Its members mostly left politics. The low quality Czech National Assembly, full of second and third raters, became the one and only legislative body in the Czech Republic.

The low quality of work in this parliament between 1992 and 1996 greatly contributed to the disillusionment of the Czech public with democratic politics. Indirectly it strengthened the position of Klaus's government. The impression was created that what was going on in parliament was meaningless, empty talk, and only the government knew what it was doing, as long as it did not need to discuss this with idiots. Thus Klaus's government could carry out its privatisation programme practically unchallenged.

The attitude of V‡clav Klaus suited the majority of the Czech nation. His pragmatic attitude and his moral relativism was acceptable to most Czechs who had got used to a special form of communist consumerism which had developed in Czechoslovakia in the 1970s and the 1980s. The dissidents from the Civic Forum, with their vague emphasis on morals, culture and intellectual concerns irritated the general public by what was perceived as sanctimoniousness and lack of action. The Civic Forum Premier Petr Pithart used to bore the Czech public on television between 1990 and 1992 about how complex various political issues were and how difficult to solve they were. Thus he became the epitome of indecisiveness in the public mind.

The attitude of V‡clav Klaus who basically argued that all problems will be solved by the market place and people do not necessarily need to be worried about ethics were much more acceptable to the Czech general public . At the same time, in the first years after the fall of communism people in the Czech Republic felt their democracy was fragile and criticising the government might jeopardise it. Often, whoever raised a critical voice, was dismissed as a destructive critic, as a communist, trying to damage the new Czech democracy.

Politicians from the 1990 Czech government lost to Klaus when they argued that privatisation had to be placed on a proper legal basis and needed to be stringently regulated. Klaus and his colleagues supported the view that privatisation needed to be done quickly. It did not really matter if the legal framework was insufficient. Their attitude was supported by the general fear that if the state command economy is not dismantled at breakneck speed, communist rule could somehow return to the country.

Klaus and his group of specialists were of the opinion that in the long run it did not really matter in what way the state-owned capital would get into private hands. Even if it were to be stolen, in a couple of decades from now, when the new property rights have been bedded down, nobody would really care any more what was the basis of the new private ownership. Klaus's government did not quite realise that lack of transparency, illegality and shady dealings, based on insider information, might discourage the influx of foreign investment into the Czech Republic.

Klaus privatised state businesses by giving every Czech citizen a book of vouchers for a nominal fee of some 25 pound. People were expected to assign these vouchers to Czech companies of their choice. Then the vouchers would become fully fledged shares, traded on the stock market. Unfortunately, Klaus excluded people's large old-age pension obligations, guaranteed by the state, from the new Czech capital markets. As a result, there was practically no local capital and the shares of the newly privatised companies sold at greatly reduced prices.

Moreover, most people did not know what to do with the vouchers. The privatisation would not have got off the ground had it not been for a young Czech emigre, one Viktor Kozeny, who set up a series of investment funds in the Czech Republic. He offered those Czech citizens who were willing to give him their voucher books ten times their value. (He never fulfilled these promises.) As a result, some six million people took part in the privatisation programme. Viktor Kozeny, who had returned into the Czech republic without a penny in his pocket, gained control over a number of key Czech businesses and personally gathered gained a fortune of some 200 million dollars. He then removed himself from the Czech Republic to the Bahamas, from where he controls his business empire with the help of a rather colourful American entrepreneur Michael Dingman. For further details, see the article The Pirates of Prague, which came out in the American Fortune Magazine last December.

Unfortunately, the Czech capital market that came into being was rather unregulated. Most people who took part in the privatisation did not have sufficient information to invest their vouchers into the truly profitable businesses. Thus, it was people with insider information gained large fortunes. The average Czech citizen profited from privatisation on average to the tune of about one thousand pounds. As a result, the impression was created in the Czech Republic that whoever is rich, must be a crook. These attitudes have been confirmed in a recent opinion poll.

Klaus's privatisation produced a rather circular, fairly complex and impenetrable structure of businesses in the Czech Republic. Most firms are owned by investment funds which are owned by major Czech banks which are mostly still owned by the state. The banks are however due to be privatised.

By the summer of 1996, some of the insufficiencies of Klaus's political and economic programme were becoming evident. People were slowly abandoning the consensus according to which the government coalition should not be criticised, lest this endanger democracy.

However, the Czech Republic has failed to produce a viable opposition. The largest opposition party, the social democrats, does not really have politicians of real stature. Inexplicably the social democrats primarily concern themselves with irrelevant issues.

Nevertheless, the results of the 1996 elections were a watershed. Klaus's ruling right of Centre ODS had lost its majority. It gained 68 seats in parliament while the opposition social democrats gained 61 seats. Thus the role of the smaller parties in the government coalition, the catholic KDU-CSL, which gained 18 seats, and the ODA, Civic Democratic Alliance, which gained 13 seats, became very important. Needless to say, these smaller parties started demanding a much bigger say in decision-making and often began holding Klaus's party to ransom. Klaus was not used to political bargaining and he found it rather difficult to adjust himself to the new situation in the first few weeks after the elections.

It is rather worrying that the old-style communist party gained 22 seats in the new parliament and the extremist, xenophobic Republican party gained 18 seats. Some observers explain the large support for the Republicans by pointing to the fact that the government has failed to deal with many basic issues. As a result, many people lend their ears to the political extremists such as the Republicans. The government coalition holds 99 seats, the opposition 101 seats.

It was to be hoped that with a much more diverse parliament, some proper political discussion would start on the Czech political scene. Unfortunately, this has not really happened. The disillusionment of the electorate has deepened, since politicians have mostly resorted to squabbling about rather irrelevant issues. The Czech public also seem to be frustrated that a number of scandals have come to the fore, and yet they are never properly investigated and nobody is ever punished.

In the summer of 1996, it transpired that the Czech Republic that the Czech banking sector was experiencing serious problems. Eleven small banks had collapsed, but their demise was dismissed by the government as basically unimportant. However, in August 1996, a fairly large Czech bank suddenly collapsed, the Kreditni bank, with losses estimated as 12 bn crowns, some 300 million pounds. As the Financial Times wrote last December, the bank was brought down partly by heavy loan losses, but also by suspected large-scale fraud. At the centre of parliamentary and police investigations is a rather mysterious financial group Motoinvest, which had managed to gain control both of Kreditni banka and of Agrobanka, the largest fully private Czech bank. In the immediate aftermath of the collapse of Kreditni banka, Agrobanka was squeezed out of the inter bank market and is now under central bank administration.

The crisis of the banking system finally forced the Czech government, at the beginning of 1997, to start preparing the setting up of an inspection authority of the Czech stock market, something like the American Securities and Exchange commission. Prior to that V‡clav Klaus adhered to the opinion that no regulation of the stock market is necessary and praised "enterprising firms and individuals" who managed to use loopholes in the Czech law to their own advantage. As late as in February 1996, Klaus repeated that the Czech Republic would not more people like the above-mentioned young entrepreneur Viktor Kozeny. The expression "tunnelling out banks or investment funds" has become notorious in the Czech republic.

There are intractable problems in other areas of Czech public life. Under communism, Czechoslovakia had a state-run, free health service, based on the British model. The health service suffered from similar problems that the British health service suffers, except that they were much more serious.

After the fall of communism, the Czech government undertook a radical reform of the health service. A large number of competing health insurance companies were created. The Czech citizens were made to contribute their personal health insurance payments to one of these companies. General practitioners and some hospitals were privatised. Doctors began charging the health insurance companies using a newly introduced points system, according to a number of actions they had taken on behalf of the patient.

Obviously, the points system encouraged the doctors to offer their patients as many services as possible. As a result, the heath service budget had grown several times in real terms since the introduction of this reform. The Czech patient is offered fairly luxurious treatment, as I experienced myself last month, when I was given a large range of luxurious Western medicines by a Czech doctor for a minor complaint, but the health insurance companies are struggling with the large costs and a number of hospitals are nearing bankruptcy. Doctors have been on strike in the Czech Republic, demanding higher pay. Their average basic pay is approximately 300 pounds per month.

There are serious problems on the antiquated railways. Railway workers have also been on strike, protesting thereby not only against the planned dismissals, but also against what they see as a gross incompetence of the management of the state-owned railway company. Teachers have also been on strike, primarily because they are seriously underpaid.

Over the past few months, the Czech political scene has been disturbed by a number of political scandals and controversies which many people would probably call a storm in a teacup.

After much delay, elections took place in November into the second chamber of Czech parliament, the Senate. People were not necessarily quite clear about the purpose of the second chamber. They were also disillusioned by the constant squabbling of Czech politicians in 1996, the double election year and so the turn-out for the Senate elections was extremely low, reaching only some 30 per cent.

The Senate elections took place in two rounds. The majority voting system was used, unlike in the election for the lower chamber, which take place on the principles of proportional representation.

The Senate election results corrected to a certain extent the social democratic gains from June 1996. Klaus's Civic Democratic Party won 32 seats, social democrats won 25 seats, KDU ‰SL 13 SEATS, ODA 7 seats and the smaller parties were disadvantaged by the majority voting system: the communists received only two seats. The main result of the Senate elections was probably more disillusionment of Czech voters with their politicians.

Shortly before the Senate elections, the head of the KDU-CSL party Josef Lux accused the Czech secret service BIS of following him and of failing to inform the government of this. The defenders of the secret service pointed out that Lux had been dangerously close to the case of the collapsed Kreditni banka and that the secret service was fully justified to investigate his involvement. More oil was poured into the fire by the head of the Czech social democratic Party, Milos Zeman, who said in the pre-election period that he had been given fifty pages of documents, detailing the work of the secret service, which show that the situation in the Czech Republic is nearing that of a police state.

The scandal went on for many weeks, until it subsequently turned out that the most of the documents, if not all of them, were actually fakes and that Seaman must have known this when he made his accusations before the senate elections. Stanislav Devaty, the head of the secret service, who had been forced to resign, has now successfully sued Zeman for damages of one million crowns.

The Czechs were shocked at the end of November 1996 that their relatively still rather revered president, former dissident playwright V‡clav Havel, a heavy smoker, had to be operated upon for lung cancer. Havel's hospitalisation was surrounded by controversy. A highly popular, rather low brow nation-wide commercial television station, owned by somewhat questionable American entrepreneurs, trailed its cameras from a block of flats opposite into the private hospital room of president Havel and broadcast picture of the president on the hospital bed without permission, allegedly in the "public interest". There were insufficiencies in Havel's hospital treatment, it transpired later for a certain time, nobody was in charge of his post operational oxygen supply and the president almost died because of this.

In the last weeks of 1996, the Czech government managed to complete its negotiations with the Germans, which had lasted for two years, and agree the so-called "Czech-German declaration", a compromise text which is supposed to serve as a point of new departure for Czech-German relations which were often rather strained in the past.

The Czech-German relations had been difficult because of the trauma of three million Germans who were deported from Czechoslovakia to Germany after the end of the second world war. Some tens of thousands of them became victims of Czech atrocities. The descendants of these Sudeten Germans, who live mostly in Bavaria, demand the return of their parents property in the Czech Republic. The Czech government refuses to do this. The German government has refused to pay compensation to the Czech victims of Nazism, until the issue of the Sudeten Germans is solved.

The compromise wording of the Czech German declaration said that the Czechs would not give in on this issue while the German government cannot prevent individual Germans from continuing to make their property claims.

On the whole, the document seems to be sensible, nevertheless it provoked a violent reaction on the part of the Czech Communists and the Czech Republicans. When Czech parliament set about approving this document in February 1997, the Republicans seized the platform and using filibustering techniques, prevented the Assembly to proceed with its appropriate business for many hours.

Klaus's Civic Democratic Party has been chasing its shadow since the June 1996 elections. In the summer significantly in Klaus's absence, the Czech Foreign Minister Josef Zieleniec complained in public that Klaus is far too authoritative and that there is no proper discussion in the party. On his return to the Czech Republic, Klaus said that this was not the case and that was that. Nevertheless, the question of Klaus's leadership and his alleged arrogance did get on the agenda of the annual ODS conference in December 1996. Milan Uhde, the head of the ODS group of MPs in Parliament said that "Klaus is capable of defeating any opinion, whether it be correct or incorrect." He stressed that the party activists must find courage to challenge their party leader, whenever they feel this is justified. The Home Secretary Jan Ruml said openly at the congress that Klaus's party was suffering a confidence crisis. Evidently, some party activists are beginning to be afraid that Klaus might lose the next elections for them.

Another little scandal, marring the Czech political scene, came shortly before Christmas. It further lessened the confidence of the ordinary Czech voters in their political leaders. Jan Kalvoda, the head of one of the smaller coalition parties the ODS and the Justice Minister - I underline this post - suddenly resigned. He admitted that he had been using the title Doctor of Law illegally - that he did not hold a doctorate.

Meanwhile, the Social Democrats were busily working on destroying their own reputation. Two of their MP voted against the wishes of their party whips. On the recommendation of the Party leader, Milos Zeman, they were expelled from the social democratic party. This gave rise to accusations that the social democrats were transforming themselves into a monolithic, authoritarian political organisation.

A certain amount of economic helplessness continued to characterised the Czech government in the first months of 1997. On the 10th March, Prime Minister Klaus finally acknowledged in public that the Czech Republic has two economic problems: seriously growing export deficit and the slowing down of economic growth. Unfortunately, Klaus is not willing to take active measures to support competitiveness and modernisation of the Czech industry. He still firmly believes that free market conditions will solve most economic problems. He sees as the fight against the power of the unions as the most important task of the government.

The housing problem is a serious issue. The average monthly pay in the Czech Republic is approximately 200 pounds per month. In spite of its free market rhetoric, Klaus's government has actually been practising social democratic politics in many areas. Rents have been centrally capped by the government. As a result, the new private owners lack funds for repairs to their properties. The banking sector is backward and there is very little mortgage finance. The system of mortgages which has been introduced recently, benefits only the richest of the rich.

Until very recently the government shied away from tackling this intractable problem. In the past few days, it decided to increase the rents in Prague by a hundred per cent and by fifty per cent in other Czech cities. At the same time the government is offering interest free loans up to approximately 4500 pounds for the purchase of properties. (Since property prices do not generally fall under 25 000 pounds, such help is only a drop in the ocean. The government has now discovered a deficit of 245 million pounds in the state budget. The great question is from what might the new interest free loans will be financed.)

Over the past few days, the Czech government has slapped a full, 22 per cent rate of VAT on domestic consumption of fuel, without a murmur of protest from the Czech public. Considering what controversy was created when the British government attempted something similar a few years ago, you can clearly see how undeveloped Czech civic society remains. Nevertheless, people are becoming relatively disillusioned because of the constantly rising prices and the general lack of direction of the government.

It would be unfair, however, to paint a bleak picture. If you visit Prague, you will discover that it has become an almost totally Westernised city. The Czechs enjoy free travel. They enjoy access to a large range of Western goods, be it the most exotic foodstuffs, or the most sophisticated consumer electronics. The Internet has become an important source of information, primarily at work. According to estimates , some 400 000 computers in the Czech Republic are wired to the Net. There is very low unemployment, primarily due to the fact that most Czech factories have not been restructured. The Czechs are not destitute - many of them have a relatively high standard of living. People are tired of the arrogance and indolence of bureaucrats, but the government has set up a commission to do away with bureaucracy.

President V‡clav Havel's New Year speech on 1st of January 1997 was perhaps significant regarding the current mood within the nation. Havel had re-married shortly after Christmas. He said that during his recent operation, he looked into the face of Death - which put things into perspective for him. Perhaps it has caused him to be a little less diplomatic. He openly criticised what he called "disgusting political squabbles, which accompanied the two sets of elections in 1996, strange collapses of banks, hardly understandable property speculations, giant thefts and many other things which constitute the negative side of our economic reform." Havel called on Czech citizens to stop squabbling and to devote themselves to a serious debate about the meaning, future and direction of the Czech Republic.

I sum up: the main source of grievance seems to be the now rather acutely felt lack of direction of Klaus's government and the inefficacy of the opposition parties. Let me quote in conclusion a rather startling attack on V‡clav Klaus which was published on 10th March in the most popular Czech daily newspaper Mlada fronta Dnes, with a daily print run of half a million copies, which until recently toed the government line:

The June 1996 elections brought about a radical change on the Czech political scene. The commentators as well as the public expected Klaus's Civic Democratic Party to analyse the reasons of the disappointing election results, and a strong counteroffensive. Instead, the Civic Democratic Party is blindly continuing on the road to defeat. For four years now the Party has been incapable of presenting its own unique vision, its own unique policies to the public. The Civic Democratic Party concentrates only on the technique of power. Klaus's Party looks for answers to the question "How?". It fails to deal with the primary question "Why?" It would be very difficult for voters to answer an opinion poll question as to what the Civic Democratic Party wishes to achieve in their view. A political party is like a business. It needs marketing and proper management. If the party makes concessions and dilutes its political programme to accommodate just anyone, the political programme dies. A politician whose programme is refused by the public, should give up power. That is the supreme proof of political integrity. A proper political programme cannot however be reduced to billboard slogans, created by an advertising agency. It has to be a fully fledged philosophy, which is realised in practice by charismatic personalities. Klaus's party lacks both. This will lead to a dramatic defeat of Klaus's party at the next election and will discredit conservatism in the Czech Republic for a long time.