The right-wing populist party "Action of Dissatisfied Citizens" (ANO) of Andrej Babis, which won the Czech parliamentary elections in early October, signed a coalition agreement a month later with two small conservative and eurosceptic parties, defining the priorities of the possible future government.
Billionaire Babis, who is the likely next Czech prime minister, had previously regained sole control of the agricultural and chemical concern Agrofert, which receives millions of euros in EU subsidies annually. So far, the ANO leader has not said how he intends to resolve this conflict of interest.
Babiš promises to explain everything
"The tone in some media publications is such that even if I die, they will continue to say that I have a conflict of interest", Babis commented ironically after negotiations with President Petr Pavel, held on November 12.
„As I have already said and – of course, I will keep my word – I will explain everything to the president. I told him that everything I do will be in line with the position of the Czech courts and the European Commission“, Babis said.
The President expects public clarifications from Babis
Meanwhile, it has become known that President Pavel expects to hear public clarifications from Babis before agreeing to appoint him as prime minister. “In his conversation with the ANO leader, the President stressed that he is obliged to respect the constitution. Therefore, he expects full clarity on how Mr. Babis intends to fulfill his constitutional and legal obligations. Otherwise, Babis's appointment would create the impression that the president himself is contributing to the emergence of an unconstitutional situation,“ the head of state's press secretary announced.
For now, however, it seems that communication between the president and the ANO leader has reached a dead end and observers do not see an easy way out of the situation.
What options does Babis have to resolve the conflict of interest?
“Babiš cannot explain to the public how he intends to deal with the conflict of interest, since there is no real solution. He could sell his business empire, but that would take months, if not years,“ suggests political scientist Jiří Pehe.
He assumes that Babis could transfer his assets to an anonymous trust, but since Czech law does not recognize such operations, it will take months to make the necessary changes to the law. “He could pass on ownership of his business empire to his children, but that is also very difficult.“
According to the political scientist, the simplest solution for Babis would be to give up his ambitions to become prime minister and nominate someone else from ANO, for example former deputy prime minister Karel Havlicek, for the post. “But Babis does not seem ready to do that yet,“ says Pehe.
Czech law requires conflict of interest to be clarified
If the norms of Czech and European law are taken into account, a way out must be found. The Czech law on conflict of interest prohibits civil servants from engaging in entrepreneurship or holding positions in companies that could benefit from government decisions.
The so-called "Babiš Law" directly prohibits politicians from owning media or companies that receive state subsidies or investment incentives.
How Babis solved this problem last time
But Agrofert's dependence on European subsidies is unquestionable. Between 2017 and 2021, when Babis first headed the Czech government, Agrofert received subsidies from Brussels worth hundreds of millions of euros. In 2017, Babis transferred Agrofert's assets to two trust funds to eliminate the conflict of interest.
However, the audit carried out by the EC in 2020 showed that despite this step, Babis remained the de facto owner of Agrofert and continued to control the company. It follows that the conflict of interest was not fully resolved. Since then, Babis has closed these trusts, becoming the sole owner of the holding again, which has only exacerbated the problem.
Is the key to appointing Babis in the hands of the president?
The key to appointing the ANO leader as prime minister is now in the hands of the president, because he has more opportunities to impose his will, political analyst Peter Just told DW. "Overall, I would say that neither Babis nor Pavel are interested in maintaining the deadlock," Just said, adding that he believes a new government could be formed in December.
Other analysts, however, are not so optimistic. They note that President Pavel wants more clarity regarding the course of the new government, especially in foreign policy and defense spending. Questions also remain unclear about the possible appointments of a number of ministers, in particular the foreign minister, whose candidacy has caused conflicting reactions. Observers believe that the new Czech government could be formed by Christmas, but there are no guarantees.