* Market risk: nagging deficits, weak cabinet or no cabinet
* Analysts say centre-right cabinet most positive
* Still no clear winner, delays to hurt fiscal work
* For results of the poll click on []
By Jason Hovet
PRAGUE, May 21 (Reuters) - A weak Czech government with no
parliamentary backing to kick off reforms and cut the budget
deficit are the biggest risks after a May 28-29 election, the
winner of which is still far from certain, a Reuters analyst
poll showed.
Czechs elect a successor to a caretaker cabinet next week
and although the left-leaning Social Democrats lead in opinion
polls, gains by smaller centre-right parties have complicated
the outcome.
With none of the leading parties having a chance to win an
outright majority, the result could be weeks or months of
wrangling before the next administration takes power.
The overwhelming majority of analysts polled by Reuters
between May 13-20 listed persistent budget deficits and the
threat of a weak cabinet as the main risk to the country's
outlook, followed by the risk of months of political bickering.
The rise of smaller parties this year has led to a number of
possible coalition outcomes, from a group of centre-right
parties to an incompatible right-left coalition led by the
left-wing Social Democrats, or a minority Social Democrat
cabinet backed by the far-left Communists.
Analysts said that while weak governments are not new for
Czech politics and have been tolerated by investors before, the
renewed focus on fiscal discipline in the wake of the Greek debt
crisis makes political uncertainty more precarious now.
"It is absolutely essential that the politicians put aside
political differences and concentrate on sorting out the dire
fiscal situation that has been left to drift from bad to worse
in recent years," said Nigel Rendell, emerging markets
strategist at RBC Capital Markets.
"The financial markets will not tolerate a repeat of the
past when it's taken months for a coalition agreement to be
reached, leaving economic policy paralysed."
Czech politics are fragmented in contrast to neighbours like
Hungary, where centre-right Fidesz won polls in April with a
two-thirds majority, or Poland, where the ruling party's
candidate will likely win a June presidential election.
NO SINGLE CHOICE
The poll showed a centre-right, Civic-Democrat-led cabinet
would be most positive for markets and the fiscal outlook, but
only five of 16 analysts said this was the most likely outcome.
The Civic Democrats pledge to kick-start pension reforms and
its potential coalition partner, the TOP09, advocates a strict
savings programme to cut the deficit from 5.9 percent last year.
Three analysts said the likely outcome would be a
centre-left cabinet led by the Social Democrats. Two predicted a
grand coalition between the two leading parties and four saw a
minority Social Democrat government with Communist support.
Nearly all analysts, 13 of 15 that answered, listed the
latter option as the most negative outcome because of plans to
hike corporate taxes and resistance to pension reform.
The previous Civic Democrat cabinet had taken a half-year to
form after a stalemate in 2006 elections and was depleted by
gradual defections that left it in the minority by the time it
lost a no-confidence vote last year.
The Social Democrats led governments between 1998-2006 but
from 2002 went through a succession of prime ministers,
including party leader Jiri Paroubek who lost the last vote in
2006.
Czech debt levels are about half the European Union's
average at 35 percent of gross domestic product but falling
revenue during the economic downturn exposed years of neglect in
reforms needed to avert growing structural deficits that
threaten to erode the budget in the years ahead.
Parties have pledged to cut the deficit in half to 3 percent
of economic output by 2013, and analysts said a centre-right
cabinet would be most likely to reach this goal.
But, they said, it can't be met without a clear majority in
the 200-seat parliament that can push through necessary reforms.
(Additional reporting by Mirka Krufova; Editing by Toby
Chopra)
