A Respite for Babis Isn’t Bad News for Czechs

(Bloomberg Opinion) -- Czech Prime Minister Andrej Babis looks set to be cleared of fraud allegations that have plagued his political career, causing potential allies to shun him and prompting hundreds of thousands of voters to demand his resignation..That wouldn’t necessarily be a bad thing. The Czech Republic deserves a stable government, and, with strong enough checks and balances, Babis has shown he can do a reasonable job at its head..The billionaire was suspected of fraudulently obtaining 50 million korunas ($2 million) of EU subsidies for a company building a conference center outside Prague called Stork’s Nest. The money was intended for small and medium-sized businesses, but the firm that received it was later merged into Babis’s agriculture and chemical conglomerate, Agrofert, a labyrinthine network of some 250 subsidiaries that employ 34,000 people. Only in 2016 did the prime minister admit that the firm was owned by his two grown-up children and a relative of his business partner..On Monday, the Czech prosecutor in charge of the case moved to drop the charges. The decision is still subject to review by a superior, and opposition politicians aren’t sure it isn’t the result of political pressure..“Much of society will not believe that such a decision would also be made in an ordinary citizen’s case,” tweeted Petr Fiala, the leader of the Civil Democratic Party, the country’s second-biggest political force after Babis’s Ano party..If the Stork’s Nest case ends without charges against Babis, he will still face a European Commission audit that could force Agrofert to pay back tens of millions of dollars in subsidies because of his conflicts of interest in distributing the grants while in government. In June, a preliminary report from the European Commission signaled that such demands were likely to be made. Babis denies any wrongdoing..The lifting of the threat of criminal charges may not placate the 250,000 citizens who demonstrated against Babis in June, after the Commission report leaked. It would, though, be a game-changer for him. It should make it easier for the prime minister to forge political alliances without his partners’ fearing a government collapse at any moment..That would be no bad thing. The instability of Babis’s minority administration amid the constant threat of no-confidence votes is perhaps the biggest problem the country faces today. His party is consistently by far the most popular in the country according to opinion polls, but he has only been able to govern in large part due to a good relationship with President Milos Zeman, who shares his prime minister’s dislike for establishment parties. This arrangement has handed Zeman, a figure well outside the European political mainstream, more power than he should have, according to the Czech constitution..Meanwhile, the Babis government has been doing a reasonable job. With unemployment at a mere 2%, the lowest level in the EU, relatively healthy economic growth (2.4% year-on-year in the second quarter), a balanced budget and – a rarity in Europe – no immediate need for monetary stimulus, the Czech Republic is in decent economic shape. It is also better-positioned to withstand a German recession than its neighbors Hungary and Slovakia since its economy is more diversified and slightly less dependent on the car industry’s supply chains..Under Babis’s government, prosperity has kept increasing, too. The Czech Republic has the highest household income, taking into account purchasing power parity, of any post-Communist nation except Slovenia..The inability of Babis’s Ano party to win an outright majority in parliament, like Prime Minister Viktor Orban’s Fidesz in Hungary or Jaroslaw Kaczynski’s Law and Justice party in Poland, has been a blessing for the Czech Republic. Babis hasn’t been empowered to start the kind of authoritarian overhaul of the justice system that has drawn Hungary and Poland into conflicts with the EU. Despite Babis’s control of some influential outlets, the Czech media landscape is still highly competitive and the opposition has more opportunities to be heard..Besides, Babis’s non-ideological pragmatism has tempered his populism. Despite the prime minister’s use of anti-immigrant rhetoric, the Czech Republic has the EU’s highest employment rate among non-EU foreigners: The country operates a simplified visa program not just for fellow Slavs from Ukraine, like neighboring Poland, but also for workers from countries such as Mongolia and the Philippines..The Czech people appear to be cautious enough not to give Babis too much power, and that makes for reasonable government. But a little more stability would help the country weather the inevitable damage the German recession is going to wreak on the economy. Babis’s conflicts of interest are well-known by now, but no obvious replacement is in sight. Perhaps he has earned a little breathing space..To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners..Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru..©2019 Bloomberg L.P.

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A Respite for Babis Isn’t Bad News for Czechs

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