UPDATE 2-Slovak coalition appears close to collapse

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By Peter Laca

Slovakia's ruling coalition appeared close to collapse on Wednesday after a fresh fracture between Prime Minister Robert Fico and his allies coincided with a parliamentary debate on the 2008 budget.

Vladimir Meciar, head of Fico's junior coalition partner, the centrist Movement for a Democratic Slovakia (HZDS), said Fico had told him he did not want to continue the coalition, which was formed in 2006. "The prime minister called a coalition meeting. At the meeting he told us he is not willing to continue the coalition," Meciar said on leaving the talks after just 15 minutes.

But the chief of another government party said he expected most of the 16 HZDS parliamentary deputies to continue backing the government, thereby maintaining the government's majority.

"I personally think that most of HZDS (deputies) will stay in the coalition... the make-up may be different but there will be 76 votes (out of 150 in parliament) for the budget," Jan Slota of the far-right SNS party said.

Parliament opened debate on the 2008 budget draft on Wednesday and is expected to vote on it by Friday.

Fico's cabinet is pursuing leftist welfare policies funded by economic growth of more than 9 percent and he is aiming to join the euro currency zone in 2009.

Fico refused to comment when asked directly whether the coalition would continue in its current form.

"We, as the Smer party, are sorry that this government crisis continues... It (Smer) will never respect a slow break-up of the government coalition," he told reporters.

No HZDS officials were immediately available to comment on the situation within the party. HZDS has broken up several times and Meciar has been quarrelling with his fellow party leaders since a 2006 election.

But the coalition has never come as close to collapse as this week following a row over disputed land transfers in an agency supervised by HZDS Farm Minister Miroslav Jurena.

Fico angered Meciar by firing Jurena last week but the HZDS nonetheless decided to stay in the coalition, a move that initially appeared to calm the tensions.

There is a tradition of minority rule in Slovakia. The previous government of Mikulas Dzurinda ruled with the support of unaffiliated deputies for more than two years before the last election.

The crown currency gave back its earlier gains after Meciar's comments but the prospect that the government might survive halted the losses at 33.400 to the euro , flat from late on Tuesday.

If Fico loses a majority, he will be vulnerable in any no-confidence motion. If the government falls, talks would start on forming a new cabinet or on an early election. (Reporting by Peter Laca, writing Jan Lopatka, editing by Robert Woodward)

Keywords: SLOVAKIA COALITION/CRISIS

[BRATISLAVA/Reuters/Finance.cz]