UPDATE 2-Czech president sees early election in late October
* President to call vote for Oct. 25-26
* Lower house set to vote on dissolution on Aug. 20
* Early poll to return country to centre-left rule
By Jason Hovet and Robert Muller
PRAGUE, Aug 16 (Reuters) - Czech President Milos Zeman will call an early election for Oct. 25-26 if parliament votes to dissolve itself next week to try to end a political standoff that has paralysed decision making in a country recovering from recession.
The second election in three years looks set to usher in a new government led by the left-leaning, pro-European Social Democrats after the centre-right coalition collapsed because of spying and corruption allegations.
It could also mark a new role in policymaking for the Communist Party (KSCM), which has not had a share in power since 1989 when its totalitarian rule of Czechoslovakia ended. The Party's return to power could trigger protests among strident anti-Communists.
"In the event that the lower house will pass the motion for its dissolution on Tuesday, then I will call an early election for October 25 and 26," Zeman told Halo Noviny newspaper.
The president's office confirmed the date.
Zeman said he had decided to announce the date in Halo Noviny, which has personal ties to the Communist party, because of the party's backing of his prime minister, and longtime ally, Jiri Rusnok in a confidence vote earlier this month.
Rusnok lost the confidence vote after the largest political parties on the left and right accused leftist Zeman of trying to grab power when he appointed Rusnok as prime minister in June.
There will be a vote on dissolving parliament on Aug. 20. Most parties agree on an early election that should return the Social Democrats to power for the first time since 2006.
Polls show the party, which says it will cancel so-called second pillar pension accounts and proposed new taxes to boost public coffers by the centre-right, would win by a double-digit margin over the nearest contender but not gain a majority in the house.
The Social Democrats, which want to prepare for the euro and are more passionate about deeper European integration than rightist rivals, won the most votes in the country's last election in 2010 but could not form a coalition.
To avoid a repeat, the party has said it will try to form a minority cabinet backed by - but not including - the far-left Communist party, which is running second or third in opinion polls. It could also look for partners among smaller centrist or even centre-right parties.
In the interview, Zeman suggested he would back a minority cabinet of Social Democrats supported by the Communist party. The president has a largely ceremonial role but has powers to appoint prime ministers and central bankers, and past actions have shown he is willing to use his powers.
The Social Democrats (CSSD), which have pushed hardest for early elections, said the proposed election date fell in line with their expectations. "CSSD has wanted an election at the earliest (possible date)," spokesman Martin Ayer said.
The confidence vote revealed the centre-right no longer had a lower house majority.
The conservative TOP09 party, part of the former ruling coalition along with the Civic Democrats, joined the main leftist parties - the Social Democrats and Communists - in support of the new election.
TOP09's vote will give the motion to dissolve parliament the needed constitutional majority to pass.
The former ruling coalition parties have seen their popularity slip sharply after three years of tax rises and spending cuts that along with the euro zone crisis pushed the European Union state into its longest recession in two decades.
The economy grew on a quarterly basis for the first time since mid-2011 in the second quarter.
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