geopolitical risk ratings firm

PRL Volume XXXII, Number 7 July 2010


Election Yields Doubts
The PS is likely to emerge from the next election, required by 2014, in a weakened position, the government formed after that will most likely be a center-right coalition including Flemish and Walloon liberal and Christian democratic parties.
The N-VA won enough support in the June 2011 elections for the king to ask party leader Bart De Wever to form a government, but since he has already ruled out any compromise on the issue of political decentralization, his efforts are not likely to be successful unless he bends on that issue.

The N-VA’s main plank in the June elections was a call to strengthen the federal system by expanding the policy-making powers of the regional administrations of Dutch-speaking Flanders and French-speaking Wallonia.
The task of forming a government is likely to shift to Elio Di Rupo, leader of the PS, who will be more inclined to make the concessions required to win the backing of parties from both regions, which is essential to establishing a reasonably stable majority coalition.


Lack of Staying Power?
Debt concerns were clearly on the minds of Czech voters when they went to the polls in late May, as indicated by the third-place finish of TOP 09, a new conservative party that campaigned almost entirely on a pledge to impose the harsh fiscal discipline required to avoid the much-dreaded “Greece scenario.”
The center-left CSSD finished on top, but its seat total of 56 ruled out any possibility of claiming a majority in the 200-member Chamber of Deputies except in a partnership with its chief rival, the center-right ODS, which won 53 seats. However, the strong showing of TOP 09, which won 41 seats, meant the ODS had the option of forming a center-right coalition—assuming ODS leader Petr Necas could convince the conservative populist VV to join as well. That task was accomplished in late June, when the three parties agreed to form a majority government.
Even with a coalition agreement in place, the government partners will need to overcome serious points of disagreement, including how best to go about reducing the fiscal deficit and the desirability of closer EU integration. For its part, the VV has made its participation in the coalition contingent upon this regime’s commitment to an aggressive anti-corruption campaign, an issue on which successive administrations, regardless of political orientation, have displayed timidity. Signs of tension are already apparent.


A New Leader
As he had previously indicated Matti Vanhanen stepped down as KESK leader and prime minister in mid-June 2010, and he was quickly replaced by Mari Kiviniemi.
Citing leg surgery as the reason for his early departure, Vanhanen had also seen a sharp drop in his popularity amid a party-funding scandal, and he may well have stepped down in an effort to help boost KESK’s standing ahead of next year’s election with a change of leadership now.
Kiviniemi is a veteran lawmaker who had headed the Ministry of Public Administration and Local Government, and she has pledged to maintain policy continuity, fostering an economic recovery while taking steps to reverse the worrisome deterioration of public finances.


Inconclusive Balloting
The collapse of Prime Minister Jan Peter Balkenende’s three-party regime in February over a disagreement regarding the country’s military involvement in Afghanistan necessitated holding an early general election, in June.
Historically, it takes about three months to form a government after an election, and the process is unlikely to speed up this time around.
The most likely outcome of coalition talks is a government made up of the VVD, the PvdA, and the CDA.
Since a disagreement between the CDA and the PvdA triggered the last government’s downfall, convincing both of them to join a VVD-led coalition could be problematic, but recent changes in the leadership of both parties may well create an opening for a renewed alliance.


Seeking FDI
Controversy over the regime’s aggressive push to implement a business-friendly policy agenda, including regulatory reforms, has led to volatility in President Ricardo Martinelli’s popularity, but his support levels remain very high.
While organized union protests may occur as a result of a recently approved package of reform measures—including revisions to laws related to the environment, labor, and public security—the regime is quite likely to weather those protests well.
Environmental activists may have more impact, however, as the new law eliminates the need for an environmental impact statement for investment projects “in the social interest” and allows the president to waive that need for other projects using “good practices” in environmental protection.
Claims that Panama has made the requirement for any environmental considerations to be irrelevant could limit access to multilateral project financing, most of which require an environmental impact statement, and blatantly bucking a global trend could make Panama a protest target.


Showing its Mettle
With the strong backing of President Traian Basescu, Prime Minister Emil Boc has met head-on the daunting challenges of fulfilling the conditions attached to a multilateral bailout package that helped to stave off the collapse of the banking sector and stabilized an economy in free fall.
Whether those measures will be adequate to ensure that the 2010 target is met is an open question, and both Boc and Basescu have reiterated their commitment to enacting the austerity measures necessary to satisfy the terms of the bailout package.
However, the survival of Boc’s minority regime will depend on continued backing from independent blocs—lawmakers holding seats reserved for representatives of ethnic minorities—and dissident lawmakers from the PSD and the PNL, which is far from assured.
All parties accept that the support of the IMF was crucial to weathering the economic crisis, but there is disagreement as to whether spending cuts represent the best method to satisfy IMF’s demands.


Surprising Turn of Events
Even though the lead party in the incumbent regime finished well ahead of the others, that was not enough to ensure a second term for Prime Minister Róbert Fico.
A center-right coalition of SDKU-DS, KDH and two new parties— SaS and Most-Híd—will take over, something that seemed inconceivable just one year ago.
Iveta Radičová of the SDKU-DS formed a new coalition rather quickly, and although it is likely to be troubled by chronic internal disagreements, the four-party alliance stands a good chance of holding together for a full term, barring a serious corruption scandal or an intractable policy impasse.


A New Era
Ending a years-long power struggle that produced crippling divisions in his party, Basdeo Panday—former prime minister and magnet for controversy and scandals—was removed as UNC leader in January.
Replacing the authoritarian and corruption-tainted Panday with Kamla Persad-Bissessar, a respected political figure with a reputation for personal integrity, increased the potential to revive the UNC’s popular support and opened the door to cooperate with UNC splinter group, the COP.
The UNC’s leadership change deprived Prime Minister Patrick Manning of his trump card, but despite his own PNM party’s taint of corruption scandals, he decided to test his government’s mandate just halfway through its five-year term, and lost.
The UNC and COP reunited for the May elections, making Persad-Bissessar the first female prime minister.


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