Czech woes deepen EU leadership dilemma

BRUSSELS (Reuters) - A no-confidence vote in the Czech government during its first spell as EU President is a new blow to reforms designed to bolster the bloc's global clout, analysts and politicians said.

Not only could Prague be distracted from the job of running everyday EU business, there could also be a delay in Czech ratification of the Lisbon Treaty, which supporters say will create a more efficient, enlarged Union of 27 states.

"It is no longer only Ireland that is unlikely to ratify the Lisbon Treaty," British Liberal Graham Watson told a European Parliament session briefly attended by Czech Prime Minister Mirek Topolanek, referring to the other wavering EU state.

"See to it that domestic difficulties do not sap your stride," he advised Topolanek before the Czech leader dashed back from Strasbourg to Prague.

The Treaty needs to be ratified in all 27 member states before it can enter force. The vote of no-confidence undermines Topolanek's leverage over backbenchers in his party and so makes the backing of the Czech upper house uncertain. Topolanek may decide to postpone any vote rather than risk losing it.

The Czech government parliamentary defeat late Tuesday by Prague's leftist opposition and a band of center-right defectors could scarcely have come at a worse time for the EU's image.

As EU president-in-office, Topolanek will welcome U.S. President Barack Obama's trip to Prague on April 5 for what was planned as a photogenic affirmation of a transatlantic partnership of equals together tackling everything from the economic crisis to climate change.

Instead, Obama will be posing for photographs with a lame duck leader at the mercy of Eurosceptic Czech President Vaclav Klaus, who has sole right to appoint a new prime minister.

Days before that, the Czechs will officially represent the EU at the Group of 20 summit of leading and emerging economies in London where the bloc wants to lead calls for more regulation to rein in the market excesses that led to the credit crunch.

BUSINESS AS USUAL?

"The Czech presidency will do its business as usual and I'm sure we'll cope," Topolanek insisted to deputies in Strasbourg.

But for backers of the Lisbon Treaty, "business as usual" under the Czech Republic, a small ex-communist country outside the euro single currency zone, has left something to be desired.

After the action-packed EU Presidency of France's Nicolas Sarkozy, Prague took the helm in January and struggled to get to grips with the dual "gas and Gaza" crises of a Russian-Ukraine gas dispute and Israeli incursions into Palestinian territory.

Shuttle diplomacy by Topolanek between Kiev and Moscow helped end the gas row and silence his critics. But everyone in Brussels knew the fragile Czech government was a time bomb that could explode -- and few are genuinely surprised it has.

While the European Commission rushed out statements saying it still trusted the Czechs' ability to carry on the presidency, the fate of the Lisbon Treaty is now more open then ever.

Cobbled together as a replacement to the EU "constitution" rejected by French and Dutch voters in 2005, the Lisbon Treaty provides for a more permanent, high-profile EU "president" figure intended to be the bloc's face to the world.

It also sets out tweaks of decision-making structures in Brussels that will be needed for the bloc to continue its expansion and take in new members from the Balkans and beyond.

Until now, attention focused on whether Irish voters would later this year give the treaty their backing the second time of asking after rejecting it over sovereignty concerns last year.

LIFE TO GO ON?

But with Klaus now calling the shots in Prague, Czech politics have emerged as the main threat to its survival.

"We have been working on this for ten years," European Parliament President Hans-Gert Poettering said. "We want the last difficult steps to be taken so this treaty can come into force at the start of 2010."

While few would dare predict whether the Treaty comes out of the coming tests in Prague and Dublin unscathed, analysts see others within the Union using the uncertainty to flex their muscles and wield more influence.

"The situation in the EU is so grave that Europe was never relying totally on the Czech Presidency to get the economy going," said Katynka Barysch of the London-based Center for European Reform (CER) think tank.

"I presume life will go on," she said, noting that the leaders of states such as Germany, France and Britain would in any case expect to take the lead in the G20 process where they, rather than Topolanek, are the big shots.

In Washington -- where the official line has long been to welcome anything that ends the EU's current institutional limbo -- reaction to the Czech upset was guarded.

While officials stressed that the EU would remain a natural partner on financial issues, Afghanistan and Iran, one U.S. official said there was mild concern the Czechs would be "distracted" from EU business.

(Additional reporting by Darren Ennis in Strasbourg, Jeremy Smith in Brussels and Sue Pleming in Washington)