Prague Pivot: Babis, ANO, and Visegrad Fiscal Drift Through 2026

From the 2024 European Parliament protest to the October 2025 Sněmovna verdict #

The June 2024 European Parliament election was the first national-scale read on the Fiala government's standing. ANO took 26.1 percent of votes cast and 7 of the 21 Czech seats, the SPOLU coalition of ODS, KDU-CSL, and TOP 09 took 22.3 percent and 6 seats, and the new Prisaha and Motorists slate took 10.3 percent and 2 seats, on a national turnout of 36.5 percent (Czech Statistical Office, volby.cz). The Pirates fell below 7 percent and lost all three of their outgoing MEPs, the first time the party had no European representation since 2019. The result confirmed ANO's lead over SPOLU at every age band above 35 and in every region except Prague and Liberec.

The October 3 to 4, 2025 Sněmovna election extended the pattern. ANO took 34.5 percent and 80 of 200 seats, SPOLU took 23.4 percent and 52 seats, the STAN movement took 11.2 percent and 22 seats, the SPD-led Stacilo bloc took 7.8 percent and 15 seats, the Pirates took 8.9 percent and 18 seats, and the Motorists took 6.8 percent and 13 seats (volby.cz official protocol, October 6 release). Turnout was 68.2 percent, the highest since 1998. Babis announced the formation of a coalition with the SPD and Motorists on October 24, 2025, and President Pavel formally appointed him prime minister designate on November 6 after a constitutional letter that conditioned the appointment on a written assurance that the coalition would honor Czech NATO and EU treaty commitments. The Babis cabinet was sworn in on December 17, 2025, and won the confidence vote 109 to 91 on January 21, 2026.

The Babis biography: agrofert, Stork Nest, and the OLAF file #

Andrej Babis, born September 2, 1954 in Bratislava, founded Agrofert in 1993 and built it into the largest Czech agricultural and chemical conglomerate, with reported 2023 revenue of roughly 245 billion koruna. He served as finance minister from January 2014 to May 2017 in the Sobotka coalition, founded ANO in 2011, and served as prime minister from December 13, 2017 to December 17, 2021. The European Anti-Fraud Office, OLAF, opened the Stork Nest, Capi hnizdo, case in 2015, and concluded in December 2017 that the Stork Nest farm received 50 million koruna of EU regional funds, roughly 2 million euro, after being temporarily separated from Agrofert. The Czech state attorney closed the criminal track in September 2019, reopened it in December 2019, and a Prague court acquitted Babis in January 2023, with the Prague High Court overturning the acquittal in November 2023 and remanding for retrial.

OLAF's separate audit on the conflict of interest under EU Financial Regulation Article 61 found in November 2021 that Babis remained the beneficial owner of Agrofert through the Cypriot trusts AB Private Trust I and II, and that 17 percent of the Czech Rural Development Programme allocations and 4 percent of the European Structural and Investment Funds drawn by Agrofert subsidiaries between 2018 and 2020 were affected, totaling roughly 11.6 million euro that the European Commission required the Czech state to recover. The Czech Constitutional Court rejected Babis's challenge to the conflict of interest law in March 2024. He has placed Agrofert in two separate trusts and continues to deny operational involvement. The political effect, three election cycles in, is that the OLAF file no longer moves marginal voters, but it constrains coalition options because no SPOLU constituent will sit in a cabinet that includes him.

Pavel, the presidency, and the constitutional brake #

Petr Pavel, born November 1, 1961, served as Chief of the General Staff of the Czech Armed Forces from 2012 to 2015 and as chair of the NATO Military Committee from 2015 to 2018, the highest NATO post ever held by a Czech officer. He won the second round of the January 2023 presidential election with 58.3 percent against Babis's 41.7 percent, on a turnout of 70.3 percent (Czech Statistical Office). Pavel has used the office's limited but non-trivial powers to set markers on three issues: NATO and EU treaty fidelity, the rule of law in judicial appointments, and continued Czech leadership of the Ukraine ammunition initiative announced at the Munich Security Conference in February 2024.

The November 6, 2025 appointment letter signaled the brake. Pavel cited Article 68 of the Czech Constitution and confirmed that he would not appoint a foreign minister or defense minister whose stated platform contradicted Czech treaty commitments. The SPD's Tomio Okamura was named speaker of the chamber on November 12, but the foreign and defense portfolios went to ANO figures Karel Havlicek and Lubomir Metnar, both of whom signed individual letters affirming continued NATO 2 percent compliance and continued participation in the ammunition initiative. The June 2024 NATO Washington Summit communique committed the Czech Republic to 2 percent of GDP defense spending, and the 2024 outturn was 2.10 percent of GDP per the Ministry of Finance and NATO June 2024 release. Babis campaigned on a NATO 2 percent pause but accepted the constraint in exchange for a free hand on the budget, on energy regulation, and on the EU Migration Pact opt-outs.

The macro envelope: CNB, fiscal trajectory, and the koruna #

The Czech National Bank cut the two-week repo rate from a peak of 7.00 percent in December 2023 to 3.50 percent by December 2024, and held at 3.50 percent through the Q1 2026 board meeting (CNB monetary policy decisions, cnb.cz). Headline CPI for full year 2024 was 2.4 percent, the lowest since 2018, and Q1 2026 CPI ran at 2.6 percent against the CNB 2 percent target with a one percentage point tolerance band (Czech Statistical Office). Real GDP grew 1.0 percent in 2024 after a 0.1 percent contraction in 2023, and the Ministry of Finance Macroeconomic Forecast of January 2026 projected 1.9 percent growth for 2026, conditioned on a stable euro area outlook.

The Fiala government closed the 2024 general government deficit at 2.3 percent of GDP, and the 2025 Convergence Programme submitted to the European Commission targeted 2.1 percent for 2025. The Babis coalition's first budget bill, tabled in February 2026, raised the 2026 deficit ceiling to 2.6 percent of GDP, lifted social transfers by 18 billion koruna, suspended the consolidation package's pension indexation cap, and reduced the corporate income tax surcharge enacted in 2024. The European Commission's Spring 2026 fiscal opinion, due May 2026, will be the first formal test of the EU economic governance framework's debt sustainability analysis applied to the Czech medium-term plan. The koruna depreciated from 25.18 per euro on October 2, 2025 to 25.94 per euro on November 7, 2025 on the coalition announcement, then recovered to 25.30 per euro by April 2026 as the foreign minister and defense minister letters reset the country risk premium (CNB daily reference rates).

Energy, Skoda, and the industrial pivot #

On July 17, 2024 the Czech state utility CEZ selected Korea Hydro and Nuclear Power as preferred bidder for the Dukovany expansion against EDF, on a 4-unit award announced for the original 2-unit tender. The government confirmed the contract for the first two units on December 4, 2024 at a price of roughly 200 billion koruna per unit, and the first concrete is targeted for 2029 with first power for unit 5 by 2036. The Babis coalition's energy program, published February 2026, retained the KHNP contract, accelerated the timeline for units 3 and 4 to a single concurrent tender, and rolled back the 2023 Fiala emissions framework on lignite phaseout, lifting the OKD and Sokolovska Uhelna closure schedule by three to five years. The Temelin small modular reactor study, awarded to Rolls-Royce SMR in October 2024, was retained.

Skoda Auto, headquartered in Mlada Boleslav, delivered 926,600 vehicles globally in 2024, down 3.4 percent from 959,500 in 2023 (Skoda Auto annual report, March 2025). China deliveries fell 25.8 percent to 17,800 units, the worst result since 2007, against a 2017 peak of 325,000. The European Commission's October 30, 2024 ruling on Chinese electric vehicle countervailing duties gave Skoda's Octavia and Enyaq lines a partial offset in 2025. The Volkswagen Group's December 2024 cost reset announced the closure of three German plants and a 35,000 headcount reduction by 2030, which the Skoda CEO Klaus Zellmer flagged as a relative opportunity for the Czech footprint. The Babis coalition committed in the February 2026 program to a 12 billion koruna package of accelerated depreciation and electricity tariff relief for energy-intensive manufacturing. Nutricia Sano, the Czech and French dairy and infant nutrition partnership in Krasna Hora, was cited as the model for foreign investment retention under the new tax regime.

Visegrad realignment, Ukraine, and the migration file #

The Visegrad Four, the Czech, Hungarian, Polish, and Slovak format established in 1991, has been functionally split since the start of the Russian war on Ukraine. The Fiala government coordinated with Warsaw against Budapest and Bratislava on Russia sanctions and Ukraine support. Robert Fico's return as Slovak prime minister in October 2023 consolidated a Bratislava line closer to Budapest. A Babis premiership in Prague creates a three-of-four configuration on Russia sanctions and on the EU Migration Pact, with Donald Tusk's Warsaw as the singular outlier. Hungary's veto of the 50 billion euro Ukraine Facility in December 2023 set the procedural template. The Babis coalition has committed to honor existing Czech bilateral defense aid to Ukraine through 2026 but to reject any further increase in the EU Multiannual Financial Framework Ukraine envelope.

The Czech ammunition initiative, announced by President Pavel at Munich on February 17, 2024, delivered roughly 1.5 million artillery shells to Ukraine through end-2024, including 800,000 from an original tranche, financed by 18 contributing countries led by Germany, the Netherlands, Denmark, and Canada (Czech Ministry of Defense quarterly reports). The Babis coalition committed in the December 2025 confidence vote agreement to maintain the initiative's procurement infrastructure but to redirect Czech bilateral contributions, roughly 7 billion koruna in 2024, to a domestic reserve. The Czech Republic is one of three EU member states, with Hungary and Poland, that voted against the Migration and Asylum Pact in May 2024. UNHCR Czech registry recorded 359,500 Ukrainian refugees with temporary protection on April 1, 2026, down from a peak of 396,000 in November 2024. The Czech labor market absorbed roughly 130,000 Ukrainian workers, and a sharp reversal would worsen the labor shortage that the Czech Chamber of Commerce reported as the top business risk in its Q1 2026 survey.

Sources #

• Czech Statistical Office, parliamentary election results 2025
• Czech Statistical Office, European Parliament election results 2024
• Czech Statistical Office, GDP and CPI releases
• Czech National Bank, monetary policy decisions and reference rates
• Ministry of Finance Czech Republic, Macroeconomic Forecast and Convergence Programme
• European Commission, Spring 2026 Economic Forecast for Czechia
• European Anti-Fraud Office, OLAF Stork Nest and Agrofert audits
• Office of the President of the Czech Republic, Petr Pavel statements and appointments
• Sněmovna Parlamentu Ceske Republiky, voting records and confidence vote protocols
• Supreme Audit Office of the Czech Republic, NKU annual reports
• Visegrad Group official documents and joint statements
• International Monetary Fund, Czech Republic Article IV consultation
• OECD Economic Outlook, Czech Republic country note
• Eurostat, government finance statistics and HICP
• NATO, defense expenditure of NATO countries 2014 to 2024
• CEZ Group, Dukovany expansion communications
• Skoda Auto annual report and global deliveries release
• UNHCR operational data portal, Ukraine refugee situation, Czech Republic
• Czech Ministry of Defence, ammunition initiative quarterly updates