The new government in the Czech Republic, which is due to be formally appointed on Tuesday, has already had a warm welcome in the markets. Czech government bonds and the koruna have edged up since it emerged that the hard-nosed liberal Miroslav Kalousek is to be finance minister in an administration headed by Petr Nečas, head of the centre-right Civic Democrats.

With the the biggest parliamentary majority of any government since the split with Slovakia in 1993, the coalition government has the votes to pass tough economic reforms and cut the budget deficit. But with three parties in the cabinet, there is always room for disputes, especially as the smallest party in the coalition – the centrist Public Affairs – is brand new, making it difficult to predict its willingness to reach compromises with the two more conservative partners – the Civic Democrats and Kalousek’s TOP09. Continue reading »