* Czech govt loses confidence vote
* May stay in power until end of EU presidency
* Early election is an option
(Adds comments from PM, opposition leader, analyst)
By Jana Mlcohova and Jan Lopatka
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
its role as EU president during the global economic downturn.
Topolanek said he was ready to resign, although the
opposition Social Democrats said his government could stay on
until Prague hands over the European Union's six-month's
rotating presidency to Sweden at the end of June.
"This government can complete the presidency," said Jiri
Paroubek, leader of the Social Democrats.
It was the third government collapse in eastern Europe this
year after the leaders of Latvia and Hungary stepped down when
their economies were hit by the financial crisis -- although
Topolanek's defeat was more to do with domestic wrangling.
The Czech Republic has been less affected than some of its
eastern European peers 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
0.7 percent to 27.17 to the euro <EURCZK=> after the vote.
The three-party ruling coalition, weak since its 2007
appointment due to a lack of a majority, lost by one vote after
defectors from its camp supported the left-wing opposition.
The opposition has blamed the government for economic
mismanagement and criticised reforms including a flat income
tax, fees for doctor visits and budget cuts.
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.
Topolanek said early polls should be held in the summer if
there was no agreement on a new government. He said he wanted a
fresh chance to form a new cabinet and would not support one of
experts.
LITTLE ROOM FOR MANOEUVRE
Topolanek's ousting precedes a special EU summit with
President Barack Obama on April 5 in Prague.
The next step is now up to President Vaclav Klaus, who has
an indefinite period to nominate 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 had narrowed to 4.5 percentage
points in a 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 will be limited
by their desire to join the euro zone, although no date has been
set for euro entry.
The tight rules for euro entry, 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 mid-February low and outperformed its peers in the region.
"The key to all these things is what happens next," said
Neal Shearing, economist at Capital Economics. "If we end up
with a technocrat government ... then it could end up being
market positive."
"If on the other end you end up with a period of infighting
it could be market negative and economy negative and could end
up in a big mess," he said.
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.
Other issues affected by the ouster could be a government
plan to host a U.S. anti-missile radar site opposed by the
Social Democrats, already on ice due to a lack of support.
Dmitry Rogozin, Russia's envoy to NATO, told Vesti-24
channel that those who forced Topolanek's government to resign
were categorically against the deployment of the radar.
"Just before the meeting of our two (Russian and U.S.)
presidents in London on April 1 ... the Americans are now facing
practically insurmountable difficulties in deploying their
strategic anti-missile defence system in Poland and the Czech
Republic," he said.
The fall of the government also calls into question the
future of the EU's Lisbon treaty, meant to allow the bloc to
function more effectively.
Topolanek had backed the treaty despite opposition from
party backbenchers, and said after the vote that, "if I lose
control of the situation (in my party), then the Lisbon Treaty
will not pass."
(Additional reporting by Jan Korselt, editing by Myra
MacDonald))
