Czech election winner Babis to seek minority gov't

LANY, Czech Republic, Oct 31 (Reuters) - Czech election winner Andrej Babis will attempt to form a minority government after being shunned by other parties, Babis said on Tuesday after meeting the president.

The country faces the possibility of months of political wrangling which could put approval of the 2018 budget approval at risk, potentially curbing investments that would help the economy keep growing at least at its current rapid pace.

Babis said he hoped to have a new government put together by the Christmas holiday.

His ANO party won a parliamentary election this month by a large margin, convincing voters it could deliver a more effective state, weed out corruption and distribute the fruits of economic expansion more fairly.

Other parties have refused to back a government that includes billionaire businessman Babis, who is facing fraud charges regarding a 2 million euro EU subsidy. Babis denies any wrongdoing, calling the charges politically motivated.

After meeting President Milos Zeman, Babis said he was "very sorry" the other parties had not given ANO a chance in coalition talks.

"We will try to form a minority government and will try to convince lawmakers ... of other parties with our program," he told a news conference alongside Zeman.

Zeman said he would give Babis a second attempt if his first try fails a confidence vote in the lower house.

Forming a minority government would require support from other parties as ANO's 78 seats do not make up a majority in the 200-member lower chamber.

Only the Communists have said they could tolerate a minority government.

OBSTACLES

Babis can be appointed prime minister only after Nov. 20, when the newly elected lower chamber of parliament opens its session. It has to elect a speaker before current Prime Minister Bohuslav Sobotka can vacate the position for his successor.

This process could take long as some parties may try to prevent Babis' appointment by blocking the speaker's election.

In 2013, Zeman rejected a majority coalition in parliament after a centre-right cabinet had collapsed, and appointed Jiri Rusnok, the current Governor of the Czech National Bank, as prime minister. His government ruled for half a year without winning a confidence vote.

Babis dismissed a suggestion by the head of the conservative TOP 09 party to block the speaker as "destructive and reckless".

"The worst thing which could happen is that we would have a blocked parliament and a provisional budget," he said.

If a budget is not approved by the end of the year, a provisional arrangement kicks in, meaning the state would run with the previous year's budget, imposing severe limits on investments and other non-mandatory spending.

Czech markets have taken the political uncertainty in their stride, with the crown trading near multi-year highs as the central bank looks set to continue raising interest rates this week.

The country of 10.6 million has a history of shaky coalition governments. The outgoing centre-left coalition, led by the Social Democrats and including ANO, is the first in 15 years to finish its four-year term.