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Czech Politics Shift Left

ByDanske Markets
Published 10/24/2013, 10:25 AM
Updated 05/14/2017, 06:45 AM

The Czech Republic is facing early general elections on 25-26 October after the centre right government of former Prime Minister Petr Necas collapsed in June following a spying and bribery scandal where Prime Minister Necas was forced to resign.

There is quite high uncertainty regarding the outcome of the forthcoming general elections. The most likely scenario is the victory of the Social Democrats, the main opposition party over the last seven years, which according to preliminary public opinion polls could win as much as 26% of votes.

The Czech Republic is quite well known for its unstable political environment. Political jitters in connection with the graft scandal of ex-PM Necas back in June were more or less ignored by the market. Therefore, we do not expect any big market reaction in connection with the upcoming general elections. The victory of the Social Democrats, which is more or less expected, could be perceived by the markets as slightly negative, as the Social Democrats could impose somewhat less business friendly policies. This said, we do not expect any big shift in business conditions in the Czech Republic and we would still expect the centre-left Social Democratic government to keep the budget deficit under control. Furthermore, the new centre-left government could probably pursue more EU friendly policies than the previous centre-right government.

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