Czechs put faith in left to save economy

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The Independent Online
DRIFTING RUDDERLESS since the collapse of the conservative government last year in a series of financial scandals, the Czech Republic is about to lurch to the left. In elections today and tomorrow, the Social Democrats are expected to capture the highest number of seats in the new parliament, completing the cycle that began with the Velvet Revolution nine years ago.

Since his ejection from office last November, Vaclav Klaus, the architect of the Czech model of Thatcherite economics, has tried to mount a comeback, but with mixed results. His Civic Democratic Party is expected to emerge after the elections as the second biggest force, but there are few coalition volunteers on the right.

Mr Klaus and his party are discredited and his economic model is in disarray. His ultra-liberal creed once held up by international financiers as a marvel is now denounced by the same people as a sham.

In his last months of stewardship, Mr Klaus cobbled together two austerity budgets which failed to arrest the slide. The currency collapsed and foreign investors have been fleeing the stock market ever since.

Growth has slowed to 1 per cent, wages are in free fall, while unemployment has taken off. Czechs are lagging behind Poland and Hungary, the former Warsaw Pact countries heading for Nato membership next year, and the European Union early next century.

The reason, according to Milos Zeman, leader of the Social Democrats, is that instead of a free market, Mr Klaus had created an "economy of mafias". "Coupons" in state property were handed over to the citizens, who sold them on to investment funds. The latter were acquired by state- owned banks, where they remain, because the government failed to carry out any real privatisation.

On the plus side, this meant that Czechs did not experience the factory closures inflicted upon their neighbours. On the minus side, somebody must now tackle the problem of inefficient companies.

Mr Klaus also stands accused of failing to curb the excesses of his rapacious cohorts. The result is the Czech Republic has become a playground of home-grown oligarchies with connections to people in the government. Mr Klaus's party took a piece of the action.

By virtue of having been kept out of power all these years, Mr Zeman's Social Democrats are reasonably clean - a quality now being sought, above all else, by the voters. Latest polls put the Social Democrats, who have no links to the Communist regime, at about 26 per cent. The single-issue Pensioners' Party, the most straight-forward coalition partner on the left, may get up to 10 per cent.