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Bank bailout shows cracks in Indonesian government

Governing coalition could collapse as lawmakers remain split on whether leading officials should face charges, analysts say


Indonesian protesters step over barbed wire during a protest against Indonesian President Susilo Bambang Yudhoyono in Jakarta on Wednesday. Indonesia’s parliament was to decide the fate of the country’s top two reformers over a controversial bank bailout, amid warnings the government’s rainbow coalition is close to breaking up. AFP

An Indonesian protestor throws a large stone at riot police during a clash outside the parliament building in Jakarta on Tuesday. AFP

JAKARTA – Indonesia’s parliament is to decide Wednesday the fate of the country’s top two reformers over a controversial bank bailout, amid warnings the government’s rainbow coalition is close to breaking up.

Lawmakers are divided as to whether Vice President Boediono and Finance Minister Sri Mulyani Indrawati should face criminal investigations for authorising the US$724 million rescue package for Bank Century.

The two have been under intense pressure from lawmakers after the country’s top auditor found strong indications of “violations” in the November 2008 bailout of the medium-sized lender.

The rescue package disbursed to save the bank was around 10 times larger than initially approved and the hearing into the bailout has been accompanied by fierce protests outside parliament.

On Tuesday stick-wielding protesters burned flags of President Susilo Bambang Yudhoyono’s Democratic Party and hurled stones and bottled water at police, who responded with tear gas and water cannons.

The controversy has put President Yudhoyono in a difficult position as he has to decide between keeping his two top reformers and preventing his rainbow coalition from disintegrating, analysts said.

“SBY needs solid political support as he still has four years ahead to rule the country,” Bantarto Bantoro from the Centre for Strategic and International Studies (CSIS) said, referring to Yudhoyono by his initials.

Yudhoyono’s Democratic Party and its political allies said the bailout was necessary to prevent a systemic economic meltdown at the height of the global economic crisis.

The former ruling party Golkar and the Muslim-based Prosperous Justice Party, both represented in the coalition cabinet, joined main opposition Democratic Party of Struggle (PDI-P) in pushing for Indrawati and Boediono to be prosecuted.

Yudhoyono, who has vowed to take responsibility for the case, will have to decide if it is best for the political parties to stay together or go their separate ways, political analyst Pande Raja Silalahi said.

“The coalition is on the verge of breaking up.... There will be a deadlock today,” he said adding that the president should settle the issue quickly.

Yudhoyono on Monday defended his colleagues, saying he accepted responsibility for a decision necessary to save the country’s entire banking sector.

“It’s correct, and I’m responsible for it,” he told bankers at a gathering at the state palace. “Though I didn’t issue any instruction or directive, I approved of it.”

Yudhoyono has won two elections since 2004 on the back of promises to root out corruption, which riddles every aspect of Indonesian public life from the courts to the customs office. AFP

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