Czech government talks hit rocky start amid Social Democrat demands

PRAGUE (Reuters) - Czech Prime Minister Andrej Babis faced a steeper path to a government deal with the Social Democrats on Wednesday after the leftist party set out key conditions for joining forces with him, while its senators opposed any coalition at all.

The Czech Republic has been without a full-fledged government for half a year as most parties have balked at joining up with Babis and his ANO party as the billionaire businessman fights off fraud allegations.

The Social Democrats' chairman, Jan Hamacek, said in a newspaper opinion piece that his party would not join a Babis-led government unless cabinet members convicted by a court resign immediately - a demand Babis has previously rejected.

Babis, who denies allegations that he illegally claimed a 2 million euro European Union subsidy a decade ago, has led a caretaker administration since his minority government lost a confidence vote in the lower house in January.

His centrist ANO movement won an election last October but fell short of an overall majority. His party has rejected putting forward a prime minister candidate other than Babis.

The Social Democrats rejoined talks with ANO last week, saying they wanted to avoid a scenario in which ANO had to seek support from the far-right, anti-EU SPD party and the far-left, anti-NATO Communists.

Among key conditions, Hamacek said his party also wanted guarantees that the SPD would lose key parliamentary posts it won with ANO backing and assurances that ANO would not outvote it in the lower house with fringe party support.

The two parties, which have already reached agreements on policy and personnel issues, were due to meet on Wednesday.

A coalition of ANO and the Social Democrats would hold 93 votes in the 200-seat lower house. It would need support from the Communist Party's 15 lawmakers in an initial vote of confidence - either by their direct support or by their leaving the chamber to lower the threshold needed to win.

But government talks are still far from certain, especially as any deal will face an internal Social Democrat Party referendum.

On Wednesday, the Social Democrats' Senate faction said they as a group opposed entering government with Babis while he faces criminal charges and raises obstacles to a deal.

"We think that (Babis) himself is doing everything he can so that a government never wins support among Social Democrats," said Petr Vicha, head of the faction, which is the largest in the 81-member upper house with 24 seats.

Relying on Communist backing for a majority could also be problematic, especially in agreeing foreign policy, he said.

Babis has shown willingness to work with fringe parties but has insisted he will not alter the course of Czech foreign policy. The country is a member of the European Union and NATO.

(Reporting by Jason Hovet and Robert Muller; Editing by Catherine Evans)