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Feb.16, 2010

A nasty political financing scandal in Slovakia forced opposition leader and former PM Mikulas Dzurinda to withdraw from campaigning at the beginning of February, dealing a serious blow to his party's chances in the parliamentary elections scheduled for June.

Over a series of press conferences in January, Prime Minister Robert Fico accused Dzurinda's Slovak Democratic and Christian Union (SDKU) party of having laundered hundreds of millions of euros in kickbacks from privatization sales of state companies at the turn of the century. The right-wing SDKU dominated two Dzurinda-led coalitions spanning 1998 to 2006, and is credited with bringing Slovakia into the EU and with introducing bold pension, healthcare and banking reforms. It is currently running second in the polls with about 15% support behind Fico's leftist Smer party at 40%.

Fico produced documents showing that the SDKU had been financed since the year 2000 through front companies in Switzerland (Allied Wings) and the UK (Destor Investments). He claimed the party had "six to seven billion crowns" (€200m-230m) stashed away in offshore accounts from privatization sales, such as the $2.7bn sale of the SPP gas utility in 2002 to Ruhrgas and Gaz de France. "How can we fight elections against a party with such money behind it?" he asked rhetorically. "The SDKU is a threat to democracy in Slovakia."

Although Fico offered no proof to back up his money-laundering charges, his attack threw the SDKU into confusion. The party's treasurer, Igor Kucej, attempted to explain the source of millions of euros in loans the SDKU had taken from anonymous sources, but in an interview published January 29 only muddied the waters with improbable explanations. For example, he claimed to own the front companies himself, but refused to provide evidence of this. Then, after a delay of 10 days, he produced some bearer shares which he claimed had been in a safe in Prague all along. Finally, Dzurinda, who founded the SDKU in 2000 and has led it since then, stepped down to deny Fico a target. "No one is perfect, and we did some things back then that we would handle differently today," he said. "But Fico is playing a monstrous game, and I don't want to give him a chance to escape responsibility for the way he has governed Slovakia."

Pots and kettles

For days it seemed as if Fico's strategy had worked. The SDKU's pro-democracy and pro-Western electorate is extremely sensitive to corruption in politics, and seemed to be abandoning the party and heading for the closest opposition alternative, the liberal Freedom and Solidarity (SAS). An early February poll gave them both 9%, which for the SAS was nearly double its previous tally. Meanwhile, Attorney General Dobroslav Trnka opened a criminal investigation into the SDKU's financing, and sent requests for information to Switzerland, the UK and the Cayman Islands.

But the storm abated, with Fico lobbing no further bombs and refusing to provide proof for his claims. For example, the prime minister said the state had received only part of the €15m for a hotel the SDKU had been integral in selling in 2003, and suggested the remainder had been laundered through the party's front companies. In fact, the rest of the money from the sale was kept in escrow by the seller to cover any unforeseen liabilities arising from the sale, and arrived on the government's accounts two years later.

Fico also seemed to be playing to the gallery on occasion, such as in claiming to fear for his life. "I know such things that I'm afraid of getting shot," he said. He also promised to visit Switzerland personally to bring back more evidence of financial wrongdoing by his opponents.

Finally, there was a growing sense that the prime minister had no right to point fingers, as his government has itself stumbled from one corruption scandal to another since coming to power in 2006. In one case, a €100m tender financed by EU funds had its tender notice pinned merely to a bulletin board behind locked doors in the inner sanctum of the Construction Ministry. The winning - and indeed only - bid came from a consortium of firms led by lawyers who represent Jan Slota, leader of the ruling coalition Slovak National Party. Slota's party also holds the reins of the Construction Ministry. On learning the details of the scandal, the European Commission refused to pay the bill. "While Mr Fico's claims are very serious, to many people it is a bit like the pot calling the kettle black," says Grigorij Meseznikov, head of the Institute for Public Affairs think-tank in Bratislava.

Fallout

While not all of Fico's arrows have found their mark, the opposition has suffered considerable damage. With elections around the corner on June 12, the SDKU has to choose a new leader to replace Dzurinda, but in recent years has done nothing to prepare for a succession. The only alternatives now are Iveta Radicova, a college professor who may lack the political weight to take on Fico, and Ivan Miklos, the face of the party's economic reforms but a political clone of Dzurinda.

And with the pugnacious prime minister promising more revelations to come, the political risks of allying with the SDKU for now outweigh the advantages. The SAS on February 11 rejected a bid by Dzurinda's party to unite with the smaller parties on the right of the spectrum to challenge Fico. "We don't feel that the SDKU has done enough to explain irregularities in its financing," said SAS boss Richard Sulik.

Sulik was followed by Bela Bugar, leader of a Hungarian ethnic minority party that partnered with Dzurinda before Fico came to power. The Christian Democrats, meanwhile, have even begun feeling out Fico on the topic of post-election cooperation. "Mr Fico has very skilfully managed to turn attention away from the scandals of his own government and to get people to focus on an old and relatively unimportant question hanging over the SDKU," says political scientist Miroslav Kusy. "It remains to be seen how long he can get away with it."