Czech Republic: Czech Republic to hold early elections in October
September 4, 2013
On 20 August, Czech lawmakers voted to dissolve the parliament, paving the way for snap elections to be held on 25 and 26 October. The decision should put an end to a protracted political crisis that began in June when scandal over corruption and abuse of power brought down the center-right coalition government led by the Civic Democratic Party (ODS). The turmoil persisted because the caretaker government, which was expected to lead the country until regular elections would have taken place in May 2014, failed to win a confidence vote on 7 August.
According to latest polls, the Social Democratic Party (CSSD) - a pro-European leftist party that has not been in power since 2006 - is likely to hold the most seats in the next legislature. The CSSD will, however, need support from other groups to form the next government. Opinion polls also show that the Communist Party (KSCM) could be represented in the legislature for the first time since the revolution removed it from power two decades ago.
The new government is expected to carry out pledges to ease the pace of fiscal consolidation. In this way, the government would support the economy in gaining traction following the Q2 exit from a technical recession, which was confirmed by recent GDP data. Nonetheless, most political analysts agree that the risk of a prolonged period of political instability after the vote remains. This could jeopardize passing the 2014 budget and impede the government's efforts to deliver on its growth-boosting efforts.
Author: Ricardo Aceves, Senior Economist