Czech left set to win election but new parties cloud outlook

Reuters

* Social Democrats almost sure to prevail but need allies

* May ask Communists for support, breaking taboo

* Uncertain outcome could rattle investors and markets

* Centre left plans to raise taxes for banks and big firms

By Jason Hovet

PRAGUE, Oct 25 (Reuters) - Czechs went to the polls onFriday in an election that will swing the nation leftwards afterunpopular budget cuts and graft scandals felled a centre-rightgovernment.

The pro-European Union Social Democrats, promising to slapnew taxes on big firms and high earners to pay for socialprogrammes, were likely to win the most votes but fall short ofa majority and find it hard to form a strong cabinet.

The party, out of power since 2006, may call on theCommunists to support it in a minority government of the EUmember state, breaking a taboo that has held since the 1989Velvet Revolution that overthrew the Soviet-dominated rulingparty.

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 coalition talks.

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, especially on theright, a number of new groupings are likely to 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 founded by Forbes-listedbillionaire and food and agricultural magnate Andrej Babis,which shot up to the third spot in a final opinion poll onMonday, behind the Social Democrats and Communists.

"I will probably vote for ANO but not because I want to,"said Vladimir Suchy, 57, a tour guide in Prague. "I won't givemy vote to the crooks that have ruled up till now. It's aprotest vote."

POLITICAL FRAGMENTATION?

Social Democrat chief Bohuslav Sobotka aimed to win at least30 percent of the vote to establish a strong mandate but couldfall short because of the strength of new and smaller parties.

"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."

The Social Democrats have pledged to keep the budget deficitbelow 3 percent of gross domestic product and will raise taxeson banks, utilities, telecoms companies and high earners.

They also plan to roll back unpopular pension and healthreforms taken under the previous centre-right government of theCivic Democrats and conservative TOP09.

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

TOP09 and the Civic Democrats are fourth and fifth in pollsand have little chance of returning to any coalition.

But the Social Democrats' plan to ask the Communist Partyfor parliamentary support has not gone down well with many whorecall its four decades of authoritarian rule.

Miroslav Kalousek, TOP09's deputy leader and financeminister in the previous government, said this election was themost important since 1989.

"It will decide whether we continue in our free democraticdevelopment or if we take another route," he said after castinghis vote on Friday, according to CTK news agency.

Overnight on Friday, a group called Dekomunizace(De-communisation) put up a giant poster of Russian PresidentVladimir Putin in a Stalinesque pose, in a Prague park.

The protest was aimed both at the Communists and atPresident Milos Zeman, a Social Democrat whom critics haveaccused of trying to extend his powers since winning thecountry's first direct presidential election.

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