Czech left set to win election but new parties cloud outlook

Reuters

* Social Democrats almost sure to prevail, will need allies

* May ask far-left Communists for support, breaking taboo

* Uncertain outcome may rattle investors, markets

* Centre-left plans to raise taxes for banks, big firms

By Jason Hovet

PRAGUE, Oct 25 (Reuters) - Czechs went to the polls onFriday in an election that will swing the nation toward the leftafter unpopular budget cuts and graft scandals felled acentre-right government.

Markets have mostly ignored the election thanks to thecountry's stability, underpinned by low debt load and the lowestborrowing costs in emerging Europe, but they may be rattled byan uncertain outcome and the risk of drawn-out negotiations.

The pro-Europe Social Democrats, promising to slap new taxeson big firms and high earners to pay for social programmes, werelikely to win the largest portion of the vote but short of amajority, and forming a strong cabinet may prove elusive.

The party, out of power since 2006, may call on the far-leftCommunists to support its minority government, breaking a tabooheld since the 1989 Velvet Revolution that overthrewSoviet-dominated communism in the now European Union state.

Polls opened at 1200 GMT on Friday and close at the sametime on Saturday. Results are expected on Saturday afternoon.

"The right in this country is a catastrophe. (I'm for)European politics and social politics," said Vitezslav Zemanek,a 38-year-old translator who said he would vote for the SocialDemocrats or, possibly, the Green party.

With voters angry at established parties, mainly on theright, a number of new groupings will likely win seats in the200-member lower house, which may force the Social Democrats toseek other, untested partners for a government.

These include the ANO (YES) party started by Forbes-listedbillionaire and food and agricultural magnate Andrej Babis,which shot up to the third spot in final opinion poll on Monday,behind the Social Democrats and Communists.

POLITICAL FRAGMENTATION?

"We are ready to talk to parties on the left and centre,"Social Democratic chief Bohuslav Sobotka told Czech Radio. "Themore parties that make it to parliament, the tougher it will beto find a deal and the less stable the government will be."

Sobotka aimed to win at least 30 percent of the vote toestablish a strong mandate. The Social Democrats have pledged tokeep the budget deficit below 3 percent of gross domesticproduct. To do so, they want to raise taxes on banks, utilities,telecoms companies and high earners.

The Social Democrats also plan to roll back unpopularpension and health reforms taken under the previous centre-rightgovernment of the Civic Democrats and conservative TOP09.

That administration unravelled in June, almost a year beforescheduled elections, when a scandal over alleged illegal spyingand bribery ensnared Prime Minister Petr Necas and his top aide,whom he later married.

TOP09 and the Civic Democrats are fourth and fifth in pollsand have only thin chances to return to any coalition.

The Social Democrats' plan to ask the Communist Party forparliamentary support is not going down well with those Czechswho still resent the party's four decades of authoritarian rule.

Overnight on Friday, a group called Dekomunizace(De-communisation) raised a giant poster of Russian PresidentVladimir Putin in a Stalinesque pose in a sprawling parkoverlooking Prague's historic centre, where a statue of theformer Soviet leader Joseph Stalin once stood in the 1950s.

The protest was aimed at the Communists as well as PresidentMilos Zeman, a Social Democrat who critics have accused oftrying to extend his powers since winning the country's firstdirect presidential election.

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