Nečas keeps ČR out of EU fiscal deal

A European Union fiscal pact that will include 25 of the 27 member states is being hailed as a triumph for German Chancellor Angela Merkel, while a surprise Czech decision to tentatively remain outside the agreement has Prime Minister Petr Nečas facing criticism for an uneven response.

Declining Jan. 30 to sign up to an agreement that would see common budgetary restrictions and penalties for all eurozone members, Nečas hinted that domestic politics played a key role in his Jan. 30 decision, all the while insisting a provision be included to allow the Czech Republic to later join the pact.

"[Nečas] is afraid of any conflict," said Milan Znoj, a political scientist at Charles University. "He tries to prevent conflict with the president, conflict within his own party and the government's further split."

Nečas cited, among other things, a disagreement over how the agreement would be ratified domestically as a reason for staying out of the deal, of which the United Kingdom has also opted out. The prime minister's Civic Democratic Party (ODS) and coalition partner TOP 09 have clashed over the issue, with the ODS pushing for a public referendum and TOP 09 a parliamentary vote. President Václav Klaus, a noted Euroskeptic and a Nečas mentor, has also pledged not to sign the agreement, which is the final constitutional step to ratification of any international agreement.

"I could not accept the agreement now because of its content and also because of a lack of clarity regarding its ratification and the effective date," Nečas said in a statement on the government website. "I see as extremely valuable the fact that the treaty has been changed in a way that allows for joining it in the future."

Nečas' decision has further sparked conflict with TOP 09, as leaders from the coalition's second-biggest party were seemingly taken by surprise.

"It is clear, uncompromised and principled," Finance Minister Miroslav Kalousek (TOP 09) said of Nečas' position in a Jan. 31 interview on Czech Radio. "And no one understands it at all."

Foreign Affairs Minister Karel Schawarzenberg (TOP 09) has said he would "definitely" sign up to the deal if it were his decision. As he left for a four-day trip to Israel Jan. 31, he expressed concern that Nečas had harmed the country's image abroad.

"Regard was given to the national socialist wing in the ODS, whereby state interests were harmed," Schwarzenberg said.

In an interview with the Czech News Agency, Schwarzenberg went on to question why Nečas had made common cause with the United Kingdom.

"[The UK position] is clear to everybody, while our position is absolutely unclear to all," Schwarzenberg said.

The fiscal compact seeks to impose automatic sanctions on countries that surpass budget deficit limits and urges member states to add balanced budget provisions to domestic laws - a position Nečas supports. Under the agreement, the European Court of Justice could impose fines of up to 0.1 percent of a country's gross domestic product if a country surpasses deficit restrictions. That money would go into the permanent eurozone bailout fund - the 500 billion euro European Stability Mechanism - which leaders, including Nečas, agreed will come into force in July.

"It is the first step toward a fiscal union," European Central Bank President Mario Draghi said. "It certainly will strengthen confidence in the euro area."

During negotiations on the fiscal pact, members of the Visegrad Four - Poland, Hungary, Slovakia and the Czech Republic - had argued non-eurozone members of the EU should also attend eurozone meetings moving forward.

"We're willing to put our signature on the pact, but on the understanding that we're taking part in it only if we have a voice in deciding about future action, including of the euro group," Polish Prime Minister Donald Tusk said on the eve of the Brussels summit Jan. 27.

As part of a Polish-driven compromise, non-eurozone countries will participate in at least one eurozone summit per year and all summits that discuss competitiveness or changes to the eurozone "architecture." Nečas said this did not go far enough.

"The move toward more presence at the eurozone summits is insufficient for the Czech Republic," he said.

Nečas had tentatively agreed to the fiscal pact concept at a December 2011 summit. The change of course caught some European leaders by surprise, including French President Nicolas Sarkozy, who shrugged off Czech reticence as a "constitutional" issue.

"A treaty at 25 is quite an achievement, given that the eurozone itself comprises only 17 members," European Council President Herman Van Rompuy said.

While EU leaders celebrated the fiscal pact agreement, markets still show skepticism as Greece continues to negotiate a deal that would see private bond holders agree to take losses on money they are owed. Germany has backtracked on a call to put the Greek budget under direct control in Brussels, after a memo outlining such a plan leaked to the press.

Meanwhile, France cut its 2012 GDP growth forecast to 0.5 percent, yields on Portuguese bonds soared, and estimates pointed to a contraction in the Spanish economy in the fourth quarter of 2011.

- Filip Šenk contributed to this report.

Benjamin Cunningham can be reached at
bcunningham@praguepost.com