Center-right political alliance SPOLU gained the largest vote share in the Czech 2021 general elections last weekend, obtaining 27.8% of the vote and 71 seats in parliament. Incumbent Prime Minister Babis party, ANO, finished a close second, with 27.1% of the vote, but managed to gain 72 seats in parliament, slightly higher than the popular vote winner, SPOLU. SPOLU and the Pirati/STAN political alliance, which finished third, with 15.6% of the vote, immediately initiated coalition talks to form a new government.
Our View
Despite regaining some of its popularity in pre-election polls, ongoing corruption scandals and Prime Minister Babis’s warm stance toward populist governments in neighboring Poland and Hungary have prevented ANO from expanding its voter base, resulting in an electoral defeat. While ANO managed to obtain a slim lead in parliament seats over SPOLU, it will be unable to form a government and will go into opposition. Thus, as FrontierView expected, the next Czech government will likely be an alliance between SPOLU and Pirati/STAN, promising pro-business reforms and a responsible fiscal policy focused on public investments in infrastructure and innovation. The new coalition’s transition to power, however, will likely be delayed by pro-ANO president Zeman, who before the election vowed to give the mandate to form a government to the party with the most votes. Zeman’s hospitalization after the election will likely delay things further, pushing the transition of power to early December 2021.
Business Implications
The future coalition has confirmed that it does not intend to raise taxes and will seek to reduce employers’ social contribution to soften some of the elevated labor costs that MNCs are experiencing. Additionally, the new government will likely maintain a strong focus on public investments in infrastructure and digitalization, which should support resilient growth. SPOLU’s win marks a shift away from Prime Minister Babis’s populist tendencies, and the new government is likely to have a pronounced pro-business character, which should alleviate some of the rising operational pressures.
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