By Robert Muller
PRAGUE (Reuters) - A junior party in the Czech ruling coalition threatened to leave the government on Tuesday, triggering the worst in a long string of crises for the austerity-minded administration and raising the chance of an early election.
Public Affairs, the smallest member of a three-party cabinet, said its ministers would resign on May 1 and demanded Prime Minister Petr Necas meet a list of conditions for it to continue supporting the government.
The decision is the most serious threat to the centre-right coalition since it took office in mid-2010, although the rebellious party has threatened to quit several times before and may well pull back at the last minute once again.
The government has won praise from investors and rating agencies for cutting the budget deficit and initiating reforms in the pension, welfare and health sectors, mostly unpopular with the public.
The prime minister took a hard stance against the rebellious party, saying he was not afraid of early elections if the government were to fall, even if it was not his preferred solution.
"I reject any blackmail or ultimatum," Necas told reporters.
"In case this political situation leads to the collapse of this government, a new election is necessary as soon as possible ... due to the budget (for 2013) and the credibility of the country."
He said he would wait for Public Affairs to spell out its demands clearly before deciding further steps.
Public Affairs' leader, Radek John, said earlier that Necas must make steps to regain public confidence in his government by April 26, propose a new cabinet and ask for a vote of confidence before party could decide whether to continue to back the coalition.
It is demanding reforms to both the justice and social security systems.
Public Affairs has been the weak link in the coalition since 2010, torn by internal rows as well as clashing frequently with Necas's centre-right Civic Democrats and the conservative TOP09.
The newly formed party won 10.9 percent in 2010 on pledges to weed out corruption in the political elite that rules the central European country of 10.5 million people.
But it soon fell into a series of sleaze scandals itself.
Vit Barta, the party's most influential official, has been charged with bribing party members to keep their loyalty. A court is expected to rule on the case in the next two weeks.
So far, the coalition has stuck together, mindful of opinion polls suggesting it would suffer a clear defeat in an early election, giving power to the centre-left Social Democrats.
Surveys have shown Public Affairs would stand almost no chance this time of crossing the 5 percent threshold to win parliamentary seats.
Finance Minister Miroslav Kalousek of the TOP09 party went on the offensive against the junior partner.
"An early election cannot bring anything good, but it is better than agony. It would have one positive aspect, and that is that something as revolting as the Public Affairs would disappear from the political scene once and forever," he said.
Political analyst Borivoj Hnizdo said the threat to pull out of government looked like brinkmanship.
"Public Affairs is losing support, so I think it's an attempt by them to be in the media. Politically, from the domestic point of view, it's not as dramatic as it looks," he said. "Even in a situation in which they would leave the coalition, they would support a minority government."
(Additional reporting by Michael Winfrey and Jason Hovet; Writing by Jan Lopatka)