PRAGUE (Reuters) - Leaders of the centre-left Czech Social Democratic Party agreed on Friday to return to talks with Prime Minister Andrej Babis's ANO party on forming a new government, a Social Democrat source at the meeting said.
The central European country has lacked a fully-fledged government since an election in October gave the centrist ANO movement a resounding victory but short of an overall majority in the lower house of parliament.
A one-party ANO minority cabinet lost a confidence vote in January and has ruled in a caretaker capacity since.
Most parties have refused to form a cabinet with ANO if the party's billionaire founder Babis is prime minister, citing conflicts of interest stemming from his business activities, and police charges that he broke rules to qualify for a 2 million-euro European Union subsidy a decade ago. He denies any wrongdoing.
The Social Democrats (CSSD) walked away from previous talks with Babis earlier this month.
Babis has since conceded a key CSSD demand, the right to nominate the interior minister, Social Democrat deputy chief Roman Onderka said earlier on Friday.
The Social Democrats say that is necessary to guarantee Babis's party cannot interfere with investigation of the alleged fraud case.
A government of ANO and the Social Democrats would have 93 votes in the 200-seat lower house, and the plan is to rely on support from 15 votes held by the far-left Communist party in the initial vote of confidence.
It would be the first time the anti-NATO and pro-Russian party had enjoyed any share of power since the end of its one-party rule in 1989. But its strength has otherwise been in decline and its election results last year were its worst in the post-communist era.
The party has said it would pressure the government to change its foreign policy, for example by trying to reduce participation in foreign military missions without a United Nations mandate.
Babis has shown willingness to work with fringe parties but has insisted he will not alter the course of the EU and NATO member country's foreign policy.
The Social Democrat source said the vote in the Friday meeting to return to the negotiating table was narrow, signalling potential hurdles ahead.
Any government deal would have to win support in a party referendum. Many members have been opposed to joining a Babis-led cabinet.
(Reporting by Robert Muller; Writing by Jan Lopatka; Editing by Andrew Roche)