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UPDATE 2-Czech government survives no-confidence vote but cabinet still fragile

Jan Lopatka

fragile@ (Adds fresh row destabilising government)

PRAGUE, June 27 (Reuters) - The Czech minority government led by the populist ANO party on Thursday survived a vote of no confidence in parliament after public protests against Prime Minister Andrej Babis, but the cabinet's fate was still in the balance.

Babis, a billionaire turned politician, has faced pressure from investigations into alleged fraud over EU subsidies and conflicts of interest regarding ties to his former business empire, one of the largest in the central European EU nation.

The no-confidence motion called by the opposition secured just 85 votes in the 200-seat lower house of parliament after 17 hours of debate that stretched past midnight.

The outcome was expected after ANO's coalition partner, the centre-left Social Democrats, and the Communist party, which has also been backing the government, both declined to join opposition parties to oust Babis.

Babis denies wrongdoing and has called investigations against him a plot by opponents. Despite a slight slide in the latest opinion poll, ANO remains the most popular party by a wide margin.

"I take this initiative as an attempt to destabilise the country," Babis told parliament before the vote. "We do not want (early election) and I hope that our government rules until the end of its mandate."

FRAGILE COALITION

The vote gives Babis temporary respite but he will face pressure both in the short run and in the longer term.

The Social Democrats' relationship with ANO has been increasingly fragile, and a number of party officials have spoken in favour of leaving the cabinet.

On Thursday, the party said it would again weigh whether to quit, irked by President Milos Zeman's refusal to appoint a new culture minister from their ranks. Party officials said Babis should use legal means to force the president to act, but Babis has avoided confrontation with Zeman.

A cabinet reconstruction would make Zeman the key power broker, as he appoints the prime minister and ministers.

The government may survive losing the Social Democrats by leaning on the support of the Communists as well as the far-right, anti-European Freedom and Direct Democracy (SPD) party. Babis had in the past however shunned an alliance with the far right.

On Sunday, more than a quarter a million people demanded that Babis quit in the biggest public protest in the country of 10.7 million since the end of communist rule in 1989.

Prosecutors are weighing whether to force him to stand trial over suspected fraud when getting a 2 million euro European subsidy for a hotel and conference centre a decade ago.

Around year-end, the European Commission will also finalise audits whose preliminary findings showed Babis had a conflict of interest and some of his former firms, now sitting in trust funds, received millions of euros in EU aid illegally.

The EU audit could be a headache for Babis if it means his former chemicals, food, media and farming empire employing more than 30,000 people has to return some past EU aid and loses access to future funding.

Under that scenario analysts have said Babis may decide to step aside himself and nominate a loyalist colleague as prime minister while continuing as decision-maker behind the scenes. (Reporting by Jan Lopatka; Editing by Toby Chopra)