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Czech Prime Minister Andrej Babis arrives at a news conference at government headquarters in Prague, Czech Republic, March 26, 2018. REUTERS/David W Cerny

(reuters_tickers)

By Robert Muller

PRAGUE (Reuters) - The chances of Czech Prime Minister Andrej Babis forming a majority government suffered a blow on Friday, with the Social Democrats officially breaking off coalition talks, raising the risk of early elections.

Talks between Babis's ANO party - which won three times as many votes as its nearest rival in a parliamentary election last October - and the Social Democrats broke down late on Thursday evening in a row over ministries.

The Social Democratic Party's leadership met on Friday and endorsed its top officials' recommendation to end talks with ANO, after Babis rejected its request to be given control of the finance or interior ministries in any alliance.

"The leadership approved unanimously the steps that we made in negotiations about a possible coalition with the ANO movement and it also ended talks with ANO about creating a coalition," Social Democrat vice-chairman Jiri Zimola told reporters.

The move will leave Babis with no viable governing partner for now. Most parties are shunning the billionaire businessman-turned-politician while he fights police allegations he illegally obtained a 2 million-euro EU subsidy a decade ago.

Babis denies wrongdoing and has refused to step aside as prime minister, as most parties have demanded.

Babis, who has repeatedly said a one-party government is his preferred option, said he would ask for a meeting with President Milos Zeman, possibly next week.

He could lean on the Communists and the far-right, anti-EU SPD party for outside support, but some ANO members object, especially to the latter party. The anti-Islam SPD is also unacceptable to all other parties

Babis's first attempt at forming a minority government lost a parliamentary confidence vote in January, leaving his cabinet to rule in a caretaker mode since.

ANO won 78 seats in the 200-member lower chamber. A record nine parties won seats in the election.

A breakdown in government negotiations increases the chances of an early election, although President Zeman has repeatedly rejected the idea and said he will give Babis ample time to try again to form a government.

Early elections require the support of three-fifths of lawmakers, which might be hard to amass, especially as the anti-establishment ANO remains well ahead in polls after winning the election with pledges to fight graft and govern with a business touch.

Zeman, re-elected in January, has remained an ally of Babis. The two, though, have differed over foreign policy issues like the government's decision to expel Russian embassy personnel last week in connection with an attack on a former Russian spy and his daughter in Britain.

Markets have largely shrugged off the protracted political stalemate - which is not unusual in Czech politics - with the economy roaring ahead and public finances in surplus.

(Reporting by Robert Muller; Editing by Andrew Roche)

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Reuters