Reuters International

Tomislav Karamarko speaks after exit polls in Zagreb, Croatia, November 9, 2015. REUTERS/Antonio Bronic

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By Igor Ilic

ZAGREB (Reuters) - Croatia's main opposition party said on Thursday it would challenge Deputy Prime Minister Tomislav Karamarko over a conflict of interest dispute through a no-confidence vote that could topple the coalition government.

Social Democrat (SDP) leader Zoran Milanovic, a former prime minister, said the alleged conflict of interest, involving the country's biggest energy firm INA, was politically unacceptable.

"It is important to separate private or business issues from public matters. Since Karamarko hasn't resigned, we will demand a vote on it," Milanovic said.

The State Commission for Conflicts of Interest, an independent body, said on Tuesday it would assess whether Karamarko had a case to answer in relation to a newspaper article alleging his wife had previous business links with a lobbyist for Hungarian energy firm MOL.

MOL is INA's biggest shareholder and the Croatian government its second largest, and the pair are at odds over management rights and INA's investment policy.

Prime Minister Tihomir Oreskovic defended his deputy, telling a news conference: "I am convinced that Karamarko has done nothing against Croatian interests."

Oreskovic said he would soon appoint a team to restart talks with MOL over INA's future without awaiting the results of an international arbitration in which both MOL and the government have been involved.

Karamarko, who says he has always kept public and business issues separate and has offered to refrain from any decisions involving INA until the issue has been resolved, heads the HDZ party, which leads the ruling centre-right coalition that took office in January.

HDZ and its junior partner Most ("Bridge") have already argued about political appointments and some reform plans, which suggests a no-confidence vote could pose a serious test to the coalition's stability.

"It is possible that some Most members who are not so happy with cooperation with the HDZ may rebel in the vote," said political analyst Ivan Rimac.

"However, six months in the parliament are needed for the deputies to receive benefits to which they are entitled, so that could also tilt the vote (in Karamarko's favour)".

The coalition has 76 seats in the 151-seat parliament. It is not yet clear when the no-confidence vote will take place.

The government has promised to tackle Croatia's key economic problems - low growth, a poor investment climate, high public debt and unemployment - and a snap election would considerably delay the pace of reforms.

With one of the weakest economies in the European Union, Croatia is closely monitored by Brussels for imbalances and any foot-dragging over reforms could trigger corrective measures.

(Reporting by Igor Ilic; editing by Gareth Jones)

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