Report Contents

December 18, 2020

Europe

EUROPE: CEE PULSE

BY Andrius Tursa

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( 5 mins)

The risk of government instability is rising in the Czech Republic and Slovenia. In Romania, three center-right parties are struggling to reach an agreement on forming a new coalition government, but an eventual compromise is expected. Meanwhile, Lithuania’s new government is struggling to cope with the pandemic as infection rates soar to become the highest levels in Europe. Finally, Russian President Vladimir Putin’s traditional year-end press conference sheds light on the Kremlin’s view of key domestic and international issues.

Czech Republic

The minority coalition government consisting of the Action of Dissatisfied People (ANO) and the Czech Social Democratic Party (CSSD) is struggling to pass the 2021 budget in the lower house of parliament. The Communist Party of Bohemia and Moravia – which usually supports Prime Minister Andrej Babis’s cabinet – is refusing to back the budget unless spending on defense is cut by CZK 10bn (EUR 381mn), which is a red line for CSSD. Babis is now seeking to win backing from a few non-affiliated deputies ahead of the vote on the budget bill on Friday, 18 December. A failure to adopt the bill would leave the country with a provisional budget for 2021 and weaken Babis politically. This would come on top of the CSSD’s recent threats to pull out from the government once the state of emergency is lifted and swirling rumors about President Milos Zeman’s preference for a caretaker government ahead of the parliamentary election in autumn 2021.

Lithuania

The seven-day rolling average of new infections per 1mn citizens stands above 1,000 – the highest in Europe – and is continuing to rise. The death toll is picking up as well, albeit with a slight delay. The country’s healthcare system is extremely strained as the newly elected government led by Ingrida Simonyte is urgently expanding the bed capacity for Covid-19 patients. As of Wednesday, 16 December, authorities introduced a six-week-long lockdown entailing the closure of all non-essential services and retail activities as well as movement restrictions within the country. Given limited compliance, the government is considering a further tightening of restrictions, including a curfew. The cabinet is also finalizing the 2021 budget, which is expected to be adopted by parliament within a week. The budget deficit is projected at 7% of GDP, with most additional expenditure allocated to unemployment benefits, subsidies, and other economic support measures. The severity of the second Covid-19 wave will hurt the economy, which was projected to experience the mildest decline in the EU (-2.2%) according to the European Commission’s autumn economic forecast.

Romania

Following the 6 December parliamentary election, negotiations on forming a new coalition government between the National Liberal Party (PNL), liberal USR-PLUS Party, and the Democratic Alliance of Hungarians in Romania (UDMR) have seen little progress. The parties are struggling to agree on the division of leadership positions in the next government and both chambers of parliament. An internal struggle for power within PNL is complicating the talks. Nonetheless, the three-party, center-right coalition remains the most likely scenario (80% probability), with the main alternative being a minority PNL-UDMR government. While President Klaus Iohannis has no formal deadline to nominate the next prime minister, a busy policy agenda and limited powers of the current interim government led by Nicolae Ciuca (independent) is turning up the pressure to reach a compromise. The newly elected parliament is scheduled to hold its first sitting on 21 December.

Russia

Today, 17 December, President Vladimir Putin held his annual press conference, including questions from the general public as well. More than a four-hour long event touched upon multiple domestic and international issues, with the pandemic being the main topic. As usual in such events, Putin acknowledged the existing challenges but sought to paint a rather positive picture of Russia’s handling of the pandemic both from the economic and healthcare perspectives. With regards to next year’s Duma election, Putin said he anticipated foreign interference, which hints that external powers could be blamed for any post-election protests. This fits well with the president’s claim that Russia’s opposition leader Alexey Navalny is backed by the US special services. At the same time, Putin denied Moscow’s alleged interference in the US presidential election dismissing such claims as provocations seeking to undermine US-Russia relations. With regards to Ukraine, Putin reaffirmed the centrality of the Minsk agreements as the only way forward for conflict resolution and blamed Kiev for the lack of progress. In the meantime, he pledged to step up support for the occupied territories in the Donbas. Putin did not reveal his post-2024 plans.

Slovenia

The risk of government instability is rising. The recently elected leader of the junior coalition member Democratic Party of Pensioners of Slovenia (DeSUS) Karl Erjavec announced today, 17 December, the party’s decision to leave the coalition government led by Janez Jansa (Slovenian Democratic Party, SDS). Such a move would strip the government of a parliamentary majority, leaving it vulnerable to a potential no-confidence motion in parliament. Such a motion might be called by four center-left opposition parties united under a Constitutional Arch Coalition (KUL). If joined by DeSUS, the opposition would have 43 out of 90 mandates in parliament, making Jansa’s government dependent on backing from the far-right Slovenian National Party (SNS) and two national minority deputies. Given a tight balance of powers in parliament, heated behind-the-scenes negotiations are expected in the coming weeks. The KUL’s move to initiate a vote of no confidence would likely signal that it managed to secure a majority to overthrow the Jansa cabinet.

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