Yesterday the three coalition parties – the Social Democrats (CSSD), the Christian Democrats (KDU) and the US - agreed to keep the coalition unchanged until the CSSD party congress to be held on March 25 – 27. Until then, KDU will stop demanding the resignation of the PM, Stanislav Gross, while CSSD will stop demanding that the KDU’s three ministers leave the Cabinet. The KDU chairman said that he would watch developments inside CSSD and hopes that the coalition can regain trust. Despite this being a rather vague statement, we believe that KDU still sees the PM’s resignation as the only solution.
Note that the party’s congress to be held in March should vote on the leaders and should decide whether Stanislav Gross should remain as party leader and/or the PM. Nevertheless, the CSSD central committee is going to meet this Saturday (March 5) and could decide whether the PM still has the confidence of his party.
The direct impact of the current political crisis on Czech blue chips should be limited except for Cesky Telecom because of the ongoing privatization. We believe that the outcome of the CSSD party congress in March should have no impact on the privatization as the date is close to the deadline for final bids (i.e. March 29) hence it is likely that the process will be completed according to the approved schedule (i.e. March 31). Therefore the upcoming CSSD central committee meeting (Saturday, March 5) could be crucial for Cesky Telecom. Below we highlight the possible outcomes of the meeting with the impact on the Cesky Telecom privatization.
We think the PM is most likely to retain the confidence of the party and thus the continuation of the current three-party coalition is the most likely scenario; hence completion of the privatization of Cesky Telecom seems to be most probable.
For illustration we include the current representation of individual parties in the lower house of parliament.