Following the surprise victory of the three-party SPOLU alliance during October's parliamentary elections and their coalition deal with the Pirates and Mayors alliance, the Czech Republic finally has a new government, led by centre-right Prime Minister Petr Fiala and supported by five, ideologically diverse parties in the lower house.

The Fiala Cabinet takes office during the onslaught of the fourth COVID-19 wave, with a clear need to focus on economic recovery and fiscal stability, alongside stated priority areas such as digitalization and EU affairs, ahead of the Czech EU Presidency in the second half of 2022.

The Fiala Government, finally appointed by President Miloš Zeman on 17th December, will face strong public pressure to deliver on its promises, which could place additional strain on a five-party coalition already straddling a range of ideological and policy positions. Major policy disagreements and coalition fractures seem almost inevitable: the key question is whether the need for political and economic stability will triumph over short-term political jostling.

In this memo, Aretera takes a deeper look at the Fiala Government, its priorities for the next four years, as well as the prospects for political stability and implications for international investors.