FACTBOX: Pakistan's coalition could split over judges

ISLAMABAD (Reuters) - The second biggest party in Pakistan's fractious ruling coalition threatens to quit the alliance unless a decision is taken soon to restore judges dismissed by former president Pervez Musharraf.

Former prime minister Nawaz Sharif, who leads the party, had set a deadline of Friday for the move, but has agreed to a debate in parliament next week after negotiations among coalition members.

The coalition is headed by the Pakistan People's Party (PPP) of assassinated former prime minister Benazir Bhutto, which has been dragging its feet on restoration of the judges.

Following are some implications of a departure by Sharif's party.

NO IMMEDIATE GENERAL ELECTION

* The departure of Sharif's Pakistan Muslim League (Nawaz) from the coalition would not force an election, analysts say, as the PPP should be able to gather enough support to rule from independents and politicians who backed Musharraf.

BATTLE OVER PRESIDENCY

* The end of the PPP and the PML (N) alliance would likely set the scene for a battle over who becomes the next president. The PPP and a southern regional party say they want Bhutto's widower, Asif Ali Zardari, who leads the PPP, to become president. Sharif's party may be reluctant to support Zardari and could nominate its own candidate.

Zardari has declined to say if he wants to be president but if he went for the post would probably want it to retain certain powers, including to dissolve the National Assembly, rather than make the presidency a ceremonial post.

Pakistan will hold a presidential election on September 6, the Election Commission said on Friday. Under the constitution members of the country's four provincial assemblies and the national parliament elect a new president within 30 days of the post becoming vacant.

ECONOMIC AND SECURITY IMPLICATIONS

* The squabbling over the judges and questions over who becomes the next president are likely to divert government attention from economic and security problems, critics say, to the dismay of investors and allies. Pakistani stocks and the rupee strengthened initially this week in hope Musharraf's resignation heralded an end to political uncertainty. But for the last three days they have weakened, with traders citing the coalition's inability to get its act together as the main factor.

Pakistan's stock market, which rose for six consecutive years to 2007, and was one of the best-performing markets in Asia in that period, has fallen about 29 percent this year.

An intensifying insurgency in Afghanistan, where 18 foreign soldiers have been killed this week, will lead to greater pressure on Pakistan to act quickly to stop Taliban attacks from sanctuaries on the Pakistani side of the border.

However, some fear a tough stance spurs tit-for-tat suicide attacks far from the border. Pakistani Taliban said such revenge was the motive for the most deadly strike yet against the military, which killed at least 67 people in suicide blasts outside the country's main defense industry complex on Thursday.

(Writing by Jerry Norton; Editing by Robert Birsel)