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Slovakia's interim government talks set for Monday

Treasury Secretary Geithner attends the Washington Ideas forum
Treasury Secretary Geithner attends the Washington Ideas forum

By Martin Santa

BRATISLAVA (Reuters) - Slovak President Ivan Gasparovic said on Friday he would dismiss Prime Minister Iveta Radicova's fallen government and start talks with political parties next week to form an interim cabinet.

Gasparovic earlier met Radicova, whose government collapsed on Tuesday after a rebel ruling party blocked the ratification of a deal to boost the euro zone's rescue fund in a parliamentary vote tied to a confidence motion.

The euro zone's second poorest member finally approved the expansion of the European Financial Stability Facility (EFSF) on Thursday with the help of the opposition, in return for a broad political agreement to hold an election in March.

Slovakia was the last of the euro's 17 members to ratify the agreement to boost the size and powers of the EFSF, the euro zone's main tool to fight its spreading debt crisis.

Its delay rattled markets and highlighted the tortuous process among the currency's disparate members of responding to debt problems that are now threatening to spread and causing a scramble by leaders to shore up their banks.

Radicova's cabinet will remain in office until a new one is formed. Coalition leaders have given no details on their plans.

"I will dismiss the government and will have to name a new government," Gasparovic told journalists. "Therefore I have decided that, Monday morning, I will summon the heads of the parliamentary parties so we can decide on the next steps."

Gasparovic did not say exactly when he would dismiss the cabinet but said he had also met with former prime minister Robert Fico, head of the leftist opposition Smer party.

Smer, Slovakia's most popular party by far with more than 40 percent support and 62 of the chamber's 150 seats, backed the EFSF but held back its vote in the first ballot to trigger the government collapse.

The most likely scenario now is probably a minority government including Radicova's SDKU party, the Christian Democrats, and the centrist Most-Hid.

SaS, the party of free-marketeer Richard Sulik which voted against the expansion of the rescue fund, said it would be dropped from the coalition.

"Our ministers will undoubtedly be replaced. They will be recalled. The government of three rightist parties will not have the support of SaS," Sulik said in an interview in Czech newspaper Hospodarske Noviny.

REFORMS STALL, BUDGET IN DOUBT

Fico has said he will remain in opposition until the election.

Gasparovic and political pundits said one solution could be to set up a cabinet made up of politically non-affiliated people to run the basic administration of the state until the election.

"No-one will rush into a government and it looks that Slovakia will have a caretaker cabinet of experts for the first time in history," said Marian Lesko, political columnist at daily Sme.

There is no time limit on when a new cabinet must be appointed. If Gasparovic does not appoint one, Radicova's administration could technically stay on as a government-in-demise in the five months until the election. Radicova has not said whether she wants to stay in her post.

Leaders of the fallen coalition approved next year's state budget with a deficit ceiling of 3.8 percent of GDP, based on an assumption of a 3.4 percent growth, but the current situation may put its approval in parliament at risk.

The government came to power in July last year, pledging to cut the overall fiscal deficit to below 3 percent of gross domestic product (GDP) in 2013.

Standard and Poor's, which raised the country's outlook to positive in August, said on Friday Slovakia's rating could be in trouble if political turmoil put reforms in doubt.

Analysts said the measures designed to boost economic efficiency, ease labor costs and lead to sustainable public finances were widely expected to stall for now.

"I think that no matter if Radicova's coalition stays or a new one comes, there will be no reforms," Lesko said.

(Reporting by Martin Santa,; writing by Michael Winfrey and Martin Santa, Editing by Maria Golovnina and Andrew Heavens)

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