* Czech president gives nod to new govt deal, says EU safe
* Markets buoyed as nerves over political turbulence ease
* Poland says could tap IMF credit line, but not needed now
By Michael Winfrey
PRAGUE, April 6 (Reuters) - Czech President Vaclav Klaus
gave a green light to a non-partisan government on Monday and
Hungary's prime minister designate won backing at the weekend,
in an easing of political turmoil in crisis-hit emerging Europe.
Poland's Finance Ministry said the European Union's biggest
eastern economy might be interested in tapping a newly formed
flexible credit line programme from the International Monetary
Fund, but did not need to do so at present.
Investors reacted with relief to signs that government
collapses in the Czech Republic and Hungary would not spiral
into deeper crisis, after months economic and political turmoil
that has prompted governments to slash growth forecasts and has
driven some currencies down by nearly a third.
Currency markets were also helped by a Financial Times
report citing an IMF paper suggesting emerging EU members should
quickly join the euro, although EU officials played it down and
the European Central Bank said strict rules must be followed.
Klaus, the Czech president, indicated he could support a
deal between outgoing Prime Minister Mirek Topolanek and the
opposition Social Democrats to make state statistics office head
Jan Fischer lead an interim government.
"In principle I am satisfied with this agreement," said
Klaus, who has the right to appoint the prime minister.
Topolanek's minority government resigned after it lost a
no-confidence motion two weeks ago, an embarrassing blow halfway
through the Czechs' stint running the EU's rotating presidency.
The defeat sparked concerns of a leadership void in the
bloc. But Klaus, a Eurosceptic who downplays the significance of
the EU presidency, said there would not be any problems.
"I met European Commission President (Jose Manuel) Barroso
for an hour yesterday and I assured him without a doubt we will
manage it," Klaus said.
In the deal between Topolanek and the Socialist Democrats,
the new government will take power on May 9 and push for early
elections, probably on Oct. 9-10.
MOOD CALMS
The economic crisis initially spared emerging Europe for
much of last year but it has since hit the region hard.
A collapse in German demand for the cars and electronics
built here has walloped exports and hammered growth, while
foreign financiers have ditched assets across the region.
Currencies have fallen by as much as 27 percent in the worst
case, Poland, since last summer. And the turmoil intensified in
March when Romania joined Hungary and Latvia on the list of EU
states to grab multi-billion euro IMF-led rescue deals.
That was followed by Hungarian Prime Minister Ferenc
Gyurcsany saying he would step down and Topolanek's loss, but
analysts said tensions had eased, even though they still expect
growth in most countries to contract this year.
The Polish zloty, the Hungarian forint, and the Czech crown
all rose, in a range of 0.6 to 1.4 percent, and stocks gained
1-2 percent.
"We are still gaining support from the overall risk rally
and a positive tone in the region," said Miroslav Tutter, a
dealer at Komercni Banka in Prague.
In Poland, Deputy Finance Minister Dominik Radziwill said
Warsaw could potentially tap the IMF's new credit line for
better run emerging countries, set up around the G20 meeting
last week when world leaders also agreed to triple the Fund's
lending power to $750 billion.
"We do not rule out that we could be interested in the new
instrument, the so-called flexible credit line, but no decision
has been made. For today, we don't have such a need," Radziwill
told Reuters in an interview.
Hungary averted political meltdown on Sunday when the ruling
Socialists and their smaller ally, the liberal Free Democrats
agreed to end a two-week political wrangle and pick Economy
Minister Gordon Bajnai as the new prime minister.
The deal has lifted the looming threat of early elections
and assures Bajnai a clear majority for his reform agenda,
although he still must slash public spending and bring the
budget into line or risk losing IMF financing.
"They'll approve the measures, but this is also a trap as
the measures will push the Socialists' popularity to record
lows," said political analyst Zoltan Kiszelly said.
"That will increase discontent, expose a party in disarray,
and will put the stability of the government in doubt."
