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Czech president swears in cabinet in showdown with parliament

Czech President Milos Zeman attends ceremony at which he named Jiri Rusnok the new prime minister, at Prague Castle, in this June 13, 2013 f
Czech President Milos Zeman attends ceremony at which he named Jiri Rusnok the new prime minister, at Prague Castle, in this June 13, 2013 f

By Jana Mlcochova

PRAGUE (Reuters) - Czech President Milos Zeman swore in a cabinet led by a longtime ally on Wednesday but it faces almost certain rejection by parties in parliament, raising the specter of prolonged political uncertainty in the central European nation.

That would increase the risk of gridlock in policymaking which could hold up a 2014 budget plan and rattle investors, who have long viewed the Czech Republic as a safe haven among emerging economies.

Zeman, a leftist, confirmed economist Jiri Rusnok as prime minister, hoping that he can pull the economy out of a recession now into its second year and lead the country into an election due next year.

But the cabinet is likely to lose a vote of confidence, due within 30 days, as Rusnok's appointment has infuriated both the three parties of the outgoing center-right coalition and the leftist opposition, who all view it as a power grab by Zeman.

Rusnok said after the swearing-in that he would negotiate with parties to try to win support for his government in the confidence vote expected early next month.

Rusnok, who served as finance minister in a Zeman-led cabinet a decade ago, replaces Petr Necas, who resigned last month after a close aide was charged with bribery and illegal spying on Necas's wife, whom he is divorcing.

Prosecutors have asked parliament to lift the former premier's parliamentary immunity so he can be charged as well. Necas said he would fight the charges.

Zeman said Rusnok's government should ensure prosecutors' independence in the investigation.

"The government's task will be to prevent any political pressure in the ongoing investigations and to fully respect the independence of the police and state attorneys," Zeman said at the swearing-in ceremony. "I believe that you will be a guarantee that affairs will not be swept under the carpet."

ZEMAN CITES STRONGER MANDATE

Zeman was elected in the country's first direct presidential election in January and says has a stronger mandate than predecessors chosen by parliament, allowing him to take bold action against the deeply unpopular outgoing coalition.

The three former ruling center-right parties say they command 101 seats in the 200-member lower and demand they be given a chance to form a new government.

If Rusnok loses the confidence vote, Zeman would need to appoint another prime minister. But there are no time limits and rival politicians fear Zeman could drag out the process to keep his favorites in power longer.

The opposition Social Democrats, who lead opinion polls by a wide margin, are pushing for an early election before the next general vote scheduled for May 2014.

The center-right's candidate for prime minister, house speaker Miroslava Nemcova, called the new government "toxic" and left the swearing-in ceremony early to avoid a glass of wine with the new ministers.

The cabinet includes several people who have worked as advisers to Zeman and current and former members of a pro-Zeman faction of the Social Democratic party, which the current president led until 2001. The party leadership has asked them to suspend their party membership.

For finance minister, Rusnok picked Jan Fischer, an economist and former technocrat prime minister in 2009-10.

The Czechs have the highest credit rating among emerging European countries, rated AA- by Standard & Poor's, and their budget deficit is set to fall below the EU-prescribed limit of 3 percent of economic output this year.

But the government's budget-cutting drive in the last three years has pushed the Czech economy into its longest recession in two decades. Fischer and Rusnok have said that returning the country to growth is a top priority for the new government.

(Additional reporting by Jan Lopatka and Robert Mueller; Writing by Jason Hovet; Editing by Mark Heinrich)

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