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Czech Prime Minister Andrej Babis tenders the resignation of his cabinet to President Milos Zeman at the Prague Castle in Prague, Czech Republic, January 24, 2018. REUTERS/David W Cerny


PRAGUE (Reuters) - Czech President Milos Zeman on Wednesday asked Prime Minister Andrej Babis for a second time to try to form a new government after a minority administration he set up in December lost a confidence vote in parliament last week.

Babis, a billionaire businessman and leader of the anti-establishment ANO party which won last October's election, has struggled to find ruling partners as he faces charges of fraud in tapping an EU subsidy 10 years ago. He denies any wrongdoing.

Zeman accepted Babis's resignation on Wednesday but then immediately asked him to form another government, giving him a political mandate to negotiate with other parties.

The two leaders have shelved past disputes to become political allies. Zeman had pledged to ask Babis to head another coalition, putting pressure on other parties to cooperate, while Babis and ANO endorsed Zeman in this weekend's presidential election run-off.

Zeman said on Wednesday he would provide time for Babis to cobble together a majority in the 200-seat lower house of parliament, where ANO only holds 78 seats.

But he said that in case he lost this weekend's election, he would appoint Babis as prime minister again anyway before his term ends on March 7. "There will be quite a short time for finding the necessary votes, so I will not insist on this condition," Zeman said at a joint news briefing with Babis.

Zeman, who has faced criticism for pursuing warmer relations with Russia and China, faces pro-European academic Jiri Drahos in the presidential run-off election round and opinion polls have them running neck and neck or give Drahos a slight edge.

But betting agencies have begun leaning towards Zeman in the past days.

Babis said he hoped rival parties would be more open to compromise in his second attempt at forming a government.

Some parties indicated they were ready to talk, but only the anti-NATO Communist Party said it had no problem accepting Babis as prime minister given the investigation against him.

Babis has also had contacts with the far-right, anti-NATO and anti-EU SPD party, and ANO has joined those two factions in a number of parliamentary votes in recent weeks.

Babis has insisted his cabinet will take a pro-EU course and not give in to demands to hold a referendum on leaving the European Union, as Britain did in 2016.

The former ruling party, the centre-left Social Democrats, took a beating in the October election and will hold a congress next month on deciding whether to join forces with ANO.

(Reporting by Jan Lopatka; editing by Mark Heinrich)

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