As expected, the current ODS minority Government did not receive the confidence in the lower house of Parliament as all Communists and Social Democrats voted against it while ODS and the Greens voted in favour, three Christian Democrats abstained. The current PM said that the Cabinet should resign next Wednesday, October 11. The President shall nominate the same or another person to from a Government. While there is no time limit for him to do so, the President mentioned that it could be after senate and communal elections held on October 21-22 at the earliest. In the mean time the current ODS minority Government would stay in power.
Our view:
While ODS was not expected to receive the confidence and there is a little direct implication for Czech blue chips, the only risk is psychological; the sale of 7% state’s take in CEZ could in theory go through anyway while CEZ could buy these shares itself. Only Philip Morris may face steeper excise tax hikes then under the ODS Government.
The current political deadlock is pointing to early elections in our view. Nevertheless, CSSD leader, Jiri Paroubek hopes for getting a chance to form a Government with the support of the Communists. If Paroubek gets the likelihood of receiving the confidence is higher than in case of ODS given the three Christian Democrats, who abstained from the voting.