Czech PM on brink of losing parliamentary majority

PRAGUE - Czech Prime Minister Stanislav Gross was on the verge of losing his parliamentary majority on Tuesday after talks to save his coalition government collapsed amid a row over his personal finances.

Gross's Social Democrats flatly rejected demands by the centrist Christian Democrats that they replace Gross because of the row, and the rift may trigger the Christian Democrats' departure from the three-party coalition.

Christian Democrat chief Miroslav Kalousek said after the coalition talks he would call a national party conference to decide on whether it should leave the government.

"We did not agree on a solution which would end the government crisis," Kalousek told reporters. The party conference will start at 1400 GMT on Wednesday.

If the Christian Democrats leave, Gross will lose his parliamentary majority -- but not his position -- and will have to rely on at least tacit support from the populist Communist Party to survive until elections in mid 2006.

It would be the closest the former totalitarian party has come to power since its rule ended in 1989. Any high-level cooperation with the Communists has been despised by mainstream parties, although many regular voting deals have been done with them in parliament in the past.

Christian Democrat Transport Minister Milan Simonovsky said he was in favor of leaving the cabinet. "I have decided to vote for (leaving the government) and I will propose it," he added.

The break-up was widely expected after the Social Democrats confirmed Gross as party chief and prime minister at their congress on Saturday.

The Christian Democrats demanded Gross quit over questions about how he paid for an apartment six years ago and due to his wife's business partnership with a woman now investigated for alleged fraud. He and his wife deny any wrongdoing.

GROSS WILL HANG ON

Gross made it clear after the congress he would hang on to power even if he lost his majority in the lower house. He said he would not make any concessions to the Communists over policy.

The Social Democrats want to stay in power until a scheduled election next year, hoping to narrow a popularity gap behind the right-wing opposition and to take credit for the country's solid economic growth after European Union entry last year.

Gross will meet President Vaclav Klaus at 3 p.m. (1300 GMT) to inform him of the latest developments.

The government will be tested within days in a no-confidence vote to be called by the center-right opposition Civic Democrats. The Communists have not said how they would vote. They have said they do not support Gross but at the same time do not support the Civic Democrats either.

If the government falls, lengthy talks on a new cabinet could be expected. Political parties may agree to amend the constitution to allow for early election.

The political crisis has been closely followed by financial markets worried it could affect the pending $3 billion sale of phone group Cesky Telecom .

Gross said at the weekend he wanted a quick decision on the sale after bids are due at 1000 GMT on Tuesday, before any no-confidence vote is held.

The crown currency was slightly weaker at 30.210 to the euro on Tuesday from 30.110 on Friday, with the political uncertainty weighing on the unit together with an expected interest rate cut this week and soft regional sentiment.

- REUTERS