Czech cabinet resigns as election winner Babis closer to new government

PRAGUE (Reuters) -The Czech centre-right government agreed to resign, Prime Minister Petr Fiala said on Thursday, a formal step to handing over power to a new cabinet being formed by populist billionaire Andrej Babis after his October election victory. 

The outgoing cabinet remains in office until Babis' team are appointed, which is not expected for several more weeks. President Petr Pavel was scheduled to accept the government's resignation later on Thursday.

Babis' eurosceptic ANO party aims to form a government by mid-December with the far-right SPD party and the Motorists party campaigning against carbon reduction policies.

The government's resignation was required by the constitution after the election of a new house speaker on Wednesday.

BUMPS AHEAD

The election-winning parties' agenda is likely to lead to higher fiscal spending, reduced support for Ukraine's fight against Russia's invasion, and stronger opposition to EU migration and climate policies than under Fiala's cabinet.

Pavel has tasked Babis with forming the new government but has not yet appointed him as prime minister. They meet next week for an update on government-building talks.

Pavel said on Wednesday he would ask Babis how he would remove a conflict of interest stemming from his ownership of companies, including his Agrofert empire of hundreds of firms mainly in farming, chemicals and food industries which receive tens of millions of euros in national and European subsidies.

Receiving public aid and contracts is legally incompatible with holding a government post.

QUESTIONS OVER NOMINEES

Pavel has also said he would protest against government nominees who could question the country's EU and NATO commitments.

This may include the defence minister, a position which according to the coalition deal goes to SPD. It has said it would pick an independent expert.

The Motorists should lead the foreign ministry and, according to media reports, insist on nominating former car racer and internet personality Filip Turek, who has in the past put on social media networks posts showing Nazi memorabilia or imitating the Nazi salute.

Turek has denied he would be a Nazi sympathiser and questioned the authenticity of the posts or called them humour in poor taste on his part. 

A source close to the presidential office told Reuters that Turek would be unacceptable.

Babis has refused to comment on personnel nominations.

(Reporting by Jan Lopatka and Jason Hovet; Editing by Chizu Nomiyama )