* Czech govt loses confidence vote, must resign
* May stay in power until end of EU presidency
* Early election is an option
(Releads with result of vote)
By Jan Korselt
PRAGUE, March 24 (Reuters) - Czech Prime Minister Mirek
Topolanek's minority centre-right government lost a vote of
confidence on Tuesday, forcing it out of office and undermining
policy-making during the global economic downturn.
Topolanek said he was ready to resign, although the
opposition Social Democrats said before the vote that his
government could stay on to complete the EU presidency, which
the Czech Republic holds until the end of June.
It was the third government collapse in eastern Europe this
year after the leaders of Latvia and Hungary stepped down after
their economies were hit by the financial crisis -- though
Topolanek's defeat was more to do with domestic wrangling.
The Czech Republic has been less affected than some of its
esatern European neighbours by the financial crisis, and despite
the political turmoil the crown currency has held broadly steady
after recovering from a drop earlier this year.
The crown dipped just 0.4 percent to 27.09 to the euro after
the vote.
The three-party ruling coalition, weak since its 2007
appointment due to a lack of a parliamentary majority, lost by
one vote after several defectors from its camp supported the
left-wing opposition.
But opposition Social Democrat leader Jiri Paroubek told a
news conference ahead of the vote that, "this government can
continue for some time as a government in resignation, it can
complete the Czech EU presidency or its substantial part."
The opposition has blamed the government for economic
mismanagement. Paroubek said a government of non-partisan
experts could be formed in the summer to lead the country to
early polls in the autumn or next spring.
Regular polls are due in mid-2010.
LITTLE ROOM FOR MANOEUVRE
Topolanek said on Monday early polls should be held in the
summer if he was defeated in the confidence vote and if there
was no agreement on a new government.
Given the split parliament, it will be very difficult to
form a new cabinet without an agreement of the main rivals,
Toplanek's right-wing Civic Democrats and the Social Democrats.
The Social Democrats lead opinion polls but their margin
over Topolanek's Civic Democrats has narrowed to 4.5 percentage
points in the latest survey released last week.
The Social Democrats have promoted more tax-and-spend
policies and rejected plans to reform the health sector.
But analysts say their margin for manoeuvre would be limited
by their desire to join the euro zone, although no date has been
set for euro entry.
The stringent economic requirements for euro membership,
combined with the fact that interest rates are set by the
independent central bank, would curtail any major impact on
policy of a change of government.
Reflecting this, financial markets have largely shrugged off
the political uncertainty. The crown has gained 10 percent from
a low seen in mid-February and outperformed other eastern
European currencies.
Although the Czech economy has suffered from a slump in
exports, its banks have needed no bailouts, the public has been
calm and Czechs are not heavily exposed to foreign debt.
The Social Democrats are heavily in favour of EU
integration. They also oppose U.S. plans to build a missile
defence radar in the Czech Republic.
(Additrional reporting by Jana Mlcochova, writing by Jan
Lopatka, editing by Myra MacDonald))
