The Czech centrist ANO party on Friday approved a coalition agreement for a new government with the center-left Social Democrats, subject to a poll of Social Democrat party members.

The minority government would aim to boost spending on defense, wages and benefits as well as infrastructure, according to a policy agenda agreed by leaders of the two parties, which Reuters saw.

It would maintain a pro-Western policy course but keep the country outside the eurozone and resist any EU pressure to accept asylum-seekers transferred from other EU states.

“This is a solid base for the creation of a stable government,” Social Democrat chief Jan Hamacek said after a party leadership meeting.

But the deal still needs the approval of rank-and-file Social Democrats; the outcome of their poll, likely to be announced June 15, is far from certain.

Prime Minister Andrej Babis’ ANO party was the clear winner of an election in October but lacks a majority. The coalition will still be in a minority, with 93 of 200 lower house seats, and require ad hoc backing from the small Communist party.

Most parties, and also some prominent Social Democrats, have rejected joining a cabinet led by the billionaire businessman because he has been charged with fraudulently tapping a European Union subsidy a decade ago. He calls the investigation a plot.

As a condition of forming a coalition, the Social Democrats secured an agreement that Babis will step down if a court finds him guilty in the fraud case.

ANO’s other concessions to the Social Democrats include raising sick pay and child allowances and increasing salaries across the education sector by 50 percent by 2021.

Communist backing

“I think Social Democrat members will respond positively … we made an awful lot of compromises,” Babis said.

If the deal falls through, he said an early election could be held next spring.

The pro-Russia and anti-NATO Communist party has said it would lend the government its 15 votes in the formal confidence vote, which would mark its first involvement in national government since the end of Communist rule in 1989.

The Communists oppose some of the potential coalition’s foreign policy plans, such as more involvement in NATO military missions, but their voice will be limited.

On defense, the new government would plan to boost spending to 1.4 percent of GDP from 1.05 percent last year, still far below the NATO guideline of 2 percent.

It would also look to stabilize debt, which has dropped thanks to strong economic growth in the past three years to 34.6 percent of GDP in 2017.

Taxes should dip with a reduction in personal income tax and in value-added tax on some services, tap water and draft beer. The budget should remain broadly balanced.

ANO’s current one-party cabinet lost a vote of confidence in January and has since served in a caretaker capacity.
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