Exclusive: China leaders consider internal democratic reform

BEIJING (Reuters) - China's outgoing leader and his likely successor are pushing the ruling Communist Party to adopt a more democratic process this month for choosing a new leadership, sources said, in an attempt to boost its flagging legitimacy in the eyes of the public.

The extent of the reform would be unprecedented in communist China where elections for the highest tiers of the party, held every five years, have been mainly exercises in rubber-stamping candidates already agreed upon by party power-brokers.

The Communist Party, which has held unbroken power since 1949, is struggling to maintain its popular legitimacy in the face of rising inequality, corruption and environmental degradation, even as the economy continues to bound ahead.

President Hu Jintao and his heir, Xi Jinping, have proposed that the party's 18th Congress, which opens on Thursday, should hold elections for the elite Politburo where for the first time there would be more candidates than available seats, said three sources with ties to the party leadership.

The Politburo, currently 24 members, is the second-highest level of power in China from which the highest decision-making body, the Politburo Standing Committee, is chosen.

They are chosen by the roughly 200 full members of the Central Committee which is in turn chosen by the more than 2,000 delegates at this week's Congress.

Under their proposal, there would be up to 20 percent more candidates than seats in the new Politburo in an election to be held next week, the sources said. It was unclear if competitive voting would also be extended to the Standing Committee.

"Hu wants expanding intra-party democracy to be one of his legacies," one source said, requesting anonymity to avoid repercussions for discussing secretive elite politics.

"It would also be good for Xi's image," the source added.

Xi is considered certain to replace Hu as party chief at the congress, with Li Keqiang, currently a vice premier, tipped to become his deputy in the once-in-a-decade transition to a new administration. Xi would then take over as president, and Li as premier, at the annual full session of parliament in March.

China experts said a more competitive election for the Politburo would mark a historic reform that could lead to surprises in the formation of Xi's administration, with wider implications for further political reform.

"This is a very, very important development," said Cheng Li, a senior fellow at the Brookings Institution in Washington.

"It would provide a new source of legitimacy. It would not just be dark-box manipulation ... The party's legitimacy is so low that they must do something to uplift the public's confidence."

However, Li and other experts remained skeptical that the proposal would be adopted, given that it could still be vetoed by party elders or conservatives.

'OPENING UP THE GAME'

Under the proposal, a Politburo with, say, 25 seats would be contested by a maximum of 30 candidates, leaving five of the candidates put forward by party power-brokers at risk of defeat.

Given the Standing Committee is chosen from the Politburo, such a reform could also lead to surprises at the most elite level of the party, which is normally decided by painstaking consensus in a series of back-room negotiations.

China experts said that of the main candidates for both the Politburo and Standing Committee this time, there are a few whose chances could be improved in a competitive Politburo vote and some who would probably sweat over the outcome.

Jean-Pierre Cabestan, a Chinese politics expert at Hong Kong Baptist University, said such a vote might help reputed reformers such as Wang Yang, Guangdong party boss, and Li Yuanchao, head of the party's powerful organization department.

"It gives back a chance to leaders like Wang Yang or even Li Yuanchao to get elected, provided - and this is a big if - they are included on the candidacy list," Cabestan said.

Wang is well known for launching limited democratic reforms in the village of Wukan this year to quell an uprising, but his chances of reaching the Standing Committee came under question recently when sources said he had been left off a preferred list of candidates drawn up by Hu, Xi and former leader Jiang Zemin.

However, front-runner Liu Yunshan, the party's propaganda chief, could have the most to fear from a more democratic vote, said Chen Ziming, an independent scholar of politics in Beijing.

"Many people do not like his work," Chen said. "They also have to take public opinion into consideration," he added.

Sources said the Hu-Xi proposal would also significantly extend the competitiveness of elections to the party's third tier, the Central Committee, a body of roughly 200 members where a very limited form of competitive voting already takes place.

At the last congress in 2007, there were 8 percent more candidates than seats for the Central Committee, up from 5 percent in 2002, according to Central Party School professor Gao Xinmin writing in the Study Times, a party mouthpiece.

Under the proposal, that could rise to up to 40 percent this time, the sources said.

The State Council Information Office, which doubles as the party spokesman's office, declined immediate comment.

The Hu-Xi proposal has been put forward at a time when the party is split between leftists who worry about major economic inequalities that have opened up after three decades of free-market reforms and those who want to accelerate those reforms.

The split revealed itself dramatically this year in the downfall of Politburo member Bo Xilai, a favorite of the left, in a murder scandal in which his wife was implicated and jailed. Bo has been expelled from the party and is to stand trial on charges including corruption.

"If you extend the (number of candidates) then the level of uncertainty opens the game up and allows people to compete and maybe coalitions to form within the party," said Cabestan of Hong Kong Baptist University.

"It opens the game in both direction - for friends of Bo Xilai as well," he added.

(Additional reporting by Ben Blanchard; Editing by Mark Bendeich and Jonathan Thatcher)

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Greeks strike over spending cuts before crucial vote

ATHENS (Reuters) - Hundreds of thousands of Greeks began a crippling 48-hour strike on Tuesday to protest against a new round of wage and pension cuts that parliament is expected to approve by a narrow margin.

The parliamentary vote on Wednesday is the biggest test yet for the government of Prime Minister Antonis Samaras, which needs victory to secure aid from foreign lenders but has failed to convince its smallest coalition partner and the public to back the reforms.

The strike, called by Greece's two biggest labor unions representing half of the four million-strong workforce, brought public transport to a virtual standstill and shuttered schools, banks and local government offices.

A crowd of about 16,000 protesters - fewer than is usual during Greece's frequent strikes - gathered outside parliament in Athens, waving flags, beating drums and chanting "People, don't bow your heads!" and "This strike is only the beginning".

It was the third major walkout in two months against the package of public spending cuts and reforms making it easier to hire and fire workers, which many Greeks feel penalize the poor and spare a wealthy elite.

"The measures are wrong, the politicians and the rich aren't paying their taxes and the only ones paying are those on 300 and 500 euros a month," said Dimitris Karavelas 42, who has been forced to shut down his small construction company.

Successions of strikes since Greece fell into crisis in 2009 have so far failed to prevent parliament from approving the international lender-prescribed cuts, which have inflicted misery on the country and kept the economy in a deep recession.

"TO HELL AND BEYOND"

The government has implored Greeks to endure the cuts to avoid national bankruptcy and promised this will be the last round of pain. Greeks, who have seen many such promises broken before, have responded with a mix of resignation and anger.

"They should go to hell and beyond," said Anais Metaxopoulou, a 65-year-old pensioner. "They should ask me how I feel when I have to go to church to beg for food. I wouldn't hurt a fly but I would happily behead one of them."

Parliamentary approval for the package - which includes cutting pensions by as much as a quarter and scrapping holiday bonuses - is needed to ensure Greece's European Union and International Monetary Fund lenders release more than 31 billion euros ($40 billion) of aid, much of it aimed at shoring up banks.

With 16 deputies from the small Democratic Left planning to vote against reforms and a non-committal response from at least five Socialist lawmakers, Samaras can count on the support of only about 154 lawmakers in the 300-seat parliament.

Any further defections from the Socialist PASOK party could put the government at risk of falling below the 151 votes needed to pass the measures, ushering in political chaos that would once again raise fears of a Greek euro zone exit.

NOTHING LEFT TO CUT

Exasperated by years of broken promises to reform, Greece's lenders have warned Athens that it cannot afford to fail again.

"Our Greek friends have no options or choice. They have to do it," said Jean-Claude Juncker, the head of the Eurogroup of euro zone finance ministers. "I am very optimistic."

Trains, buses and the subway came to a halt as the strike began. Many flights have been cancelled, ships remained in port and taxi drivers stayed off the streets.

The opposition anti-bailout Syriza party, which polls show is leading in popularity, called for a big turnout in rallies against measures it said would deal a "final blow" to society.

Police beefed up security to prepare for clashes with hooded protesters that usually mark demonstrations.

But by 1330 GMT demonstrators had peacefully dispersed from Syntagma Square, where protesters have frequently clashed with police in front of parliament.

Greece's economy has shrunk by a fifth since the debt crisis exploded. Public debt is seen at 189 percent of gross domestic product next year and Athens is expected to be widely off track from targets under its latest bailout agreed with the troika of the IMF, the European Commission and the European Central Bank.

Many Greeks say the latest cuts will do little to solve the country's debt problem and instead could tear society apart.

"Someone needs to tell them there's nothing left to cut," said Vassilis Dimosthenous, a 50-year-old construction worker who has been without a job for 10 months. "They've made our daily lives unbearable. If only I was 10 years younger I'd leave this place."

(Additional reporting by Kevin Lim in Singapore, Writing by Deepa Babington; editing by Janet McBride)

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Afghanistan rules out peace deals with Haqqanis

KABUL (Reuters) - Afghanistan welcomes the United Nations' decision to impose sanctions on the Haqqani network and would not negotiate for peace with the group blamed for several high-profile attacks in the country, the presidential spokesman said on Tuesday.

On Monday the U.N. Security Council's Taliban sanctions committee added the Haqqani network to a U.N. blacklist, the United States said.

Aimal Faizi, President Hamid Karzai's chief spokesman, said Kabul backed the U.N. decision, but added it should have been made a long time ago to weaken the Haqqanis, a Pashtun tribe allied to the Afghan Taliban, who he said had carried out most of the terrorist attacks in the nation over the past 10 years.

Although the Afghan government is engaged in reconciliation talks with members of the Taliban, it rules out dialogue with the Haqqani group, believed to be based in the unruly border area between Pakistan and Afghanistan.

"We don't want any kind of deal with the Haqqanis, who were behind many of the attacks on Afghan security forces and civilians including women and children," Faizi told Reuters.

"We have certain negotiating conditions with armed opposition groups but the Haqqanis do not meet the criteria and they are in the service of a foreign spy agency."

Afghan and U.S. officials have accused Pakistan's intelligence agency of using Haqqani militants as proxies in Afghanistan to counter the influence of rival India. Islamabad denies the allegations.

The United States designated the Haqqani network a terrorist organization in September, a move the group's commanders said proved Washington was not sincere about peace efforts in Afghanistan.

Isolating the Haqqanis, who were blamed for the 18-hour attack on embassies and parliament in Kabul in April, could complicate efforts to secure peace in Afghanistan as most NATO combat troops prepare to leave by the end of 2014.

The Haqqanis say they are intricately tied to the Afghan Taliban and both groups insist they must act in unison in any peace process.

Most of the Haqqani leaders have already been blacklisted individually.

Still, the Haqqanis run a sophisticated financial network, raising money through kidnapping, extortion and drug trafficking, but through a legitimate business portfolio that included import/export, transport, real estate and construction interests in Afghanistan, Pakistan and the Gulf.

(Writing by Michael Georgy; Editing by Greg Mahlich)

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Military planners prepare for war in Mali

BAMAKO (Reuters) - Military experts from Africa, the United Nations and Europe have drawn up preliminary plans to recapture northern Mali from al Qaeda-linked rebels, African officials said on Tuesday.

A source with knowledge of the plan said it will involve a force of more than 4,000 personnel, mostly from West African countries.

"Every military option will be used - ground and air," the source said, asking not to be named.

The crisis in Mali has become a security concern for Western governments worried its vast desert could turn into a training ground for militants.

Once an example of African democracy, it fell into chaos after a coup in March in the capital Bamako that toppled the president and paved the way for the rebel takeover of the north.

International military experts drew up the plan at a week-long meeting in Bamako and submitted it to the West African regional bloc ECOWAS for approval on Tuesday. The blueprint will then be reviewed by the United Nations Security Council in mid-November, setting the stage for action.

"We need to respond in detail to the Security Council on the logistics, timing, size and funding for the deployment of this mission," Desire Ouedraogo, president of the ECOWAS Commission, told military planners at a ceremony on Tuesday.

"So your conclusions will be crucial in the next step, of getting the United Nations Security Council to adopt a new resolution authorizing deployment."

The Security Council gave African leaders 45 days from October 12 to draw up a plan for military intervention to retake control of the north. Diplomats say that any such operation is months away, however.

While regional and international efforts to deal with the situation have been hobbled by division over how far to proceed with negotiations with the rebels, a consensus is building that an intervention is inevitable.

Representatives from the Islamist rebel group Ansar Dine are pursuing talks with regional mediator Blaise Compaore, the president of Burkina Faso. Ansar Dine has also sent delegates for talks with regional power Algeria in an apparent effort to head off an intervention.

The official present at the planning meetings said a military headquarters for the mission would be set up in Koulikoro, about 60 km (45 miles) from Bamako.

U.S.-based risk consultancy Stratfor said an intervention would likely drive al Qaeda-linked fighters out of their strongholds - Timbuktu, Gao, and Kidal - and into the mountain ranges of Mali and Niger where their influence could be contained.

Former colonial power France has been a vocal backer of military action. The United States, which spent years working with the Malian army against al Qaeda's Sahara wing, has called for a more cautious approach, seeking elections first to strengthen the political leadership.

(Writing by Richard Valdmanis; Editing by Angus MacSwan)

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Putin sacks defense minister amid scandal

MOSCOW (Reuters) - President Vladimir Putin fired Russia's defense minister over corruption allegations on Tuesday, the latest twist in an unfolding saga of power, money and suspected adultery at the heart of the Kremlin.

Putin announced on television that he had fired Anatoly Serdyukov, once seen as one of the president's most loyal courtiers but lately a liability amid allegations that the military sold off assets cheaply to insiders.

"Taking into consideration the situation around the Defense Ministry, in order to create conditions for an objective investigation into all matters, I have decided to remove Defense Minister Serdyukov from his post," Putin said.

Serdyukov's replacement will be Sergei Shoigu, recently named governor of the Moscow region and known as a popular and loyal Putin ally during nearly two decades as head of the Emergencies Ministry.

The defense minister wields immense power in Russia, channeling billions of dollars every year through the country's powerful defense industry, the second largest arms exporter in the world. Putin has promised to spend 23 trillion roubles ($726.30 billion) on the military by the end of the decade.

Corruption has been endemic at the defense ministry for decades. The country's top military prosecutor said last year that a fifth of the budget was stolen or embezzled.

Putin said at the televised meeting with Shoigu that he must continue "grandiose plans for the reform of the army".

Russian investigators raided the offices of Defense Ministry firm Oboronservis last month and opened an investigation into the company on suspicion that it had sold assets to commercial firms at a loss of nearly $100 million.

Russian media have been speculating for days that Serdyukov had lost Putin's support after having an extra-marital affair that infuriated Serdyukov's powerful father-in-law and patron, Viktor Zubkov, chairman of oil monopoly Gazprom.

When police raided the apartment of Serdyukov's neighbor, 33-year-old female military bureaucrat Yevgeniya Vasilieva, they found valuable paintings, rare antiques and more than 100 expensive rings.

A Russian tabloid newspaper with connections with security personnel reported that Serdyukov was in the apartment as well when the raid began. Vasilieva was reported on Tuesday to have left the country, Interfax news agency reported.

ENEMIES IN HIGH PLACES

A one-time furniture salesman, Serdyukov owed much of his career to Zubkov, a confidante of Putin from their days in St Petersburg, who served as prime minister in 2007-08.

Serdyukov's control over Russia's arms budget had earned him enemies among ambitious Kremlin figures, including Deputy Prime Minister Dmitry Rogozin who oversees the country's defense industry, government sources say.

"Mr. Serdyukov controlled at least a quarter of our budget and of course there are a lot of people who wanted a share of that pie," said independent defense analyst Thomas Golts.

Serdyukov's military reforms, which reorganized troops, cut the number of officers by more than 100,000 and exposed high level corruption, also made him disliked in the ranks.

He headed the tax ministry from 2004-07 when a tax case dismantled the assets of jailed former oil tycoon Mikhail Khodorkovsky, a role that had led many analysts to believe Serdyukov was untouchable and would weather the scandal.

Shoigu, 57, an army general, was emergencies minister from 1994 until this year, earning a reputation for personally intervening in natural disasters and other calamities that plagued Russia in the years since the Soviet Union collapsed.

He gained the trust of the Kremlin and average Russians after his effective reorganization of the civilian defense troops, a paramilitary body he inherited from the Soviet Union.

In April of this year, when he took office as Moscow regional governor, he was considered Russia's third most trusted politician in a survey by independent pollster Levada.

That popularity may leave him room to travel higher in the government run by prime minister Dmitry Medvedev, a former president whose star, some analysts speculate, is falling.

"Shoigu is unknown in our country as a great strategist or as a powerful military officer, but that is not needed in the post of the minister of defense," said Alexei Arbatov, a military analyst at the Russian Academy of Sciences.

"If the defense minister is largely an administrative post, then Shoigu has very great merits ... As an administrator he is already regarded very highly and moreover, he is popular in Russia and in social opinion," he said.

($1 = 31.6675 Russian roubles)

(Additional reporting by Lidia Kelly and Maria Tsvetkova; Editing by Timothy Heritage and Peter Graff)

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Peace envoy fears Somalia fate for Syria

BEIRUT (Reuters) - The international envoy for Syria fears the country could turn into a new Somalia unless its crisis is resolved, warning of a scenario in which warlords and militia fill a void left by a collapsed state.

In an interview with the London-based al-Hayat newspaper, veteran Algerian diplomat Lakhdar Brahimi played down the risk of sectarian and ethnic partition of Syria, but said: "What I am afraid of is worse ... the collapse of the state and that Syria turns into a new Somalia."

The Horn of Africa country has been without effective central government since the outbreak of civil war in 1991.

"People are talking about the risk of partition in Syria. I do not see partition," said Brahimi, who was appointed as U.N.-Arab League envoy to Syria in August to replace former U.N. Secretary-General Kofi Annan.

"I believe that if this issue is not dealt with correctly, the danger is 'Somalisation' and not partition: the collapse of the state and the emergence of warlords, militias and fighting groups."

Brahimi's job is complicated by international and regional differences on how the 19-month-old conflict should be resolved.

It began as a peaceful uprising against President Bashar al-Assad's rule, inspired by revolts against leaders in other Arab states. But an armed struggle developed within months as Assad deployed military force to quell protests.

Asked how long the conflict could go on, Brahimi said: "Everyone must face a bitter, difficult and scary truth: that this type of crisis - if not dealt with correctly day by day - can go on for a year, two years and more."

"I hope that it doesn't go on for this period, and it might not if everyone inside and outside (Syria) does what he should."

Speaking in Cairo on Sunday, Brahimi called on world powers to adopt a U.N. Security Council resolution based on an understanding brokered by Annan in Geneva in June which called for the establishment of a transitional government in Syria.

Russia and China have blocked three previous draft U.N. Security Council resolutions that would have added to international pressure on Assad. The Geneva Declaration did not specify what role, if any Assad would play in a future Syria.

Brahimi said: "Yes, the Security Council is divided. What is required is that the Geneva agreement be translated into a resolution."

(Writing by Tom Perry; Editing by Alistair Lyon)

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Lawmakers order partial re-run in Ukraine vote

KIEV (Reuters) - Ukraine's outgoing parliament ordered re-runs in five electoral districts on Tuesday, overriding complaints by the opposition which says President Viktor Yanukovich's party is trying to rob them of seats won national polls late last month.

Yanukovich's Party of the Regions and allies retained their majority in October 28 parliamentary elections but international observers and three opposition parties said the vote was tainted by fraud and pre-election bias in local media.

The Batkivshchyna (Fatherland) of jailed former Prime Minister Yulia Tymoshenko, far-right nationalists and a liberal party headed by boxing champion Vitaly Klitschko, have organized protests outside the Central Election Commission's offices in the capital Kiev.

They are demanding recounts in 13 constituencies where they say they have been cheated out of victory.

The authorities have until November 12 to announce the preliminary overall results and binding official results by November 17. It was not clear when the approved re-runs could take place.

Prime Minister Mykola Azarov dismissed the fraud allegations and accused the opposition of seeking to foment a repeat of the 2004-5 "Orange Revolution", when street protests against vote-rigging doomed Yanukovich's first bid for the presidency.

"Once again we're hearing calls for destabilization," Azarov told reporters. "We have no extra money for absurd ideas. The country has held elections. It has formed a parliament. It will work according to its schedule," he said.

The outgoing parliament, dominated by the Regions party, approved re-runs in five districts that each elect one deputy, and stalled opposition pressure for a broader recount in 13 districts by setting up a committee to study the matter.

Senior figures in the anti-Yanukovich coalition said they would continue to press their demands despite Tuesday's vote.

"We are demanding that the Central Electoral Commission conduct a count of the vote (in the 13 districts) and announce our candidates the winners," Arseny Yatseniuk, a former economy minister who heads the united opposition in the absence of Tymoshenko, told journalists.

"We will not vote for a farce. We will demand from President Yanukovich that he be the guarantor of the constitution and not the guarantor of fraud," he said.

RUNNING OUT OF STEAM

Klitschko, the WBC world heavyweight champion who heads the UDAR (Punch) party, said: "Up to November 12 we will continue to keep up moral pressure on those at the Central Electoral Commission and the presidential administration and will show them that votes should not simply be stolen."

Even if the opposition won all 13 contested seats, the Regions would retain a majority in the 450-seat parliament, assuming help from traditional parliamentary allies such as the communists.

Securing the disputed seats could provide the opposition with a springboard to challenge Yanukovich, whom they accuse of fostering corruption and cronyism, if he stands for re-election in 2015.

However, the numbers of demonstrators at election headquarters in Kiev down to just a few hundred, the steam seemed to be running out of the protest.

Yanukovich's pro-business Regions party, which is financed by wealthy industrialists, says it alone can provide stability in Ukraine, a major exporter of steel and grain.

(Additional reporting by Pavel Polityuk and Natalia Zinets; Editing by Jon Boyle)

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Turkey to allow Kurdish language to be used in court

ISTANBUL (Reuters) - Kurdish militants appear to have achieved their aim of being able to speak in their own language in court after the Turkish government said it would soon submit a bill to parliament on the subject.

Courts' refusal to allow defendants who speak Turkish to use Kurdish in their defense has been a source of controversy in ongoing court cases against hundreds of defendants accused of links to the Kurdistan Workers Party (PKK) militant group and resolving the issue has been one of several key Kurdish demands.

Some 700 Kurdish inmates in dozens of prisons are refusing solid food to try to exert pressure on Prime Minister Tayyip Erdogan's government to grant greater Kurdish minority rights and better conditions for a jailed militant leader.

Turkey's main medical association has warned that some of the hunger strikers may die if they continue their protest.

The government said its decision to change the law had nothing to do with the hunger strike.

"A person will be able to defend themselves in court in the language in which they can best express themselves," Deputy Prime Minister Bulent Arinc told reporters late on Monday after a cabinet meeting where the issue was discussed.

"The prime minister has given the order to our justice minister to develop this and send it rapidly to parliament to become law," he said.

Arinc said the ruling AK Party had pledged the reform in a booklet distributed at its congress in September, seeking to dispel the idea it was acting in response to the hunger strike.

Erdogan's government has boosted Kurdish cultural and language rights since taking power a decade ago, but Kurdish politicians are seeking greater political reform, including steps towards autonomy for mainly Kurdish southeastern Turkey.

The leader of the main pro-Kurdish party welcomed the move.

"But we don't have another 56 days ahead us to sort this out. There are only a few days. These statements must be acted on," BDP leader Selahattin Demirtas told a party meeting.

Fifty six is the number of days the militants have been on hunger strike for.

"DON'T UPSET US"

Arinc called on the inmates to end their protest.

"Don't upset us and our nation," he said. "Please end these strikes in the knowledge that there is a democratic atmosphere in Turkey where your demands can be discussed."

Erdogan has taken a hard line, describing the protest as blackmail and a "show". The head of the Turkish Medical Association has warned that such comments risked hardening the inmates' resolve.

The protesters' main demand is for PKK leader Abdullah Ocalan, who is imprisoned on an island in the Marmara Sea south of Istanbul, to have access to his lawyers after 15 months of no contact. Most of the inmates are either convicted PKK members or accused of links to the outlawed group.

A PKK statement said it believed the hunger strike could end if the protesters' "reasonable demands" were met.

The protests follow a surge in violence between Turkey and the PKK, which took up arms in 1984 with the aim of carving out an independent Kurdish state. Turkish Kurds now number around 15 million, or around one fifth of the population.

The PKK has staged some of its bloodiest attacks in more than a decade this year as tensions grow between Turkey and its neighbor Syria, which Ankara has accused of arming the PKK.

More than 40,000 people have been killed in the conflict between the Turkish state and the PKK, designated a terrorist group by Ankara, the United States and the European Union.

(Additional reporting by Gulsen Solaker and Ayla Jean Yackley; Writing by Daren Butler; Editing by Andrew Osborn)

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Cautious optimism in Czech government ahead of confidence vote

PRAGUE (Reuters) - Czech ruling party officials voiced guarded optimism on Tuesday the center-right cabinet would survive a parliamentary confidence vote despite threats by rebel deputies to bring it down over a plan to raise taxes.

Prime Minister Petr Necas is struggling to keep afloat his cabinet, unpopular due to two years of austerity policies and a series of graft scandals, after defections wiped away his three-party coalition's parliamentary majority.

The government's focus on austerity has brought debt costs to an all-time low but also depressed domestic demand in an economy that has been in recession since late 2011, the worst performance in central Europe.

The lower house is due to vote on Wednesday on the cabinet's plan to hike value-added, income and other taxes to cut the budget deficit below 3 percent of gross domestic product next year, a move that sparked a rift in the government camp.

Necas paired the tax vote with a vote of confidence, which means a failure would lead to the cabinet's resignation.

Senior officials in Necas's Civic Democratic Party said they would hold talks with the handful of rebel deputies to secure support for the cabinet, which is backed by only 99 seats in the 200-seat lower house, including the rebellious faction.

BETTER MOOD

The government might also get support from former coalition deputies who have left the government ranks, said Zbynek Stanjura, head of the Civic Democrat parliamentary faction.

"We will be glad if some other deputies support the government ... many of those who are in opposition now had earlier voted for the cabinet's agenda," he said.

Some of the rebels have indicated they are ready for a compromise, and the mood ahead of the vote has improved compared with last week, party officials said.

"I'd say it can turn out well," one Civic Democrat deputy told Reuters. Another party source said he was "slightly optimistic".

One opposition deputy from the centrist Public Affairs, a party that split from the ruling coalition in spring, said on Tuesday he would support the cabinet. Sources from the government parties said others might join him.

The government needs a simple majority of deputies in attendance to win the vote on Wednesday, making it easier for Necas than if he needed an absolute majority, or 101 votes.

Deputies have proposed a series of amendments to the tax bill, which should bring 22 billion crowns ($1.11 billion) in new revenue next year, and its final wording is uncertain.

Some amendments, preferred by the rebellious deputies, would take out most of the tax hikes. That could result in the bill being approved and the government surviving, but with tax plans far short of what it wanted.

That would not go down well with a junior coalition party, the conservative TOP09. Petr Gazdik, leader of its parliamentary faction, said on Tuesday the party might quit the government if that happens, but keep supporting it by votes in parliament.

If approved by the lower house, the tax bill is likely to be sent back by the upper house, dominated by left-wing opposition. To override its veto, Necas would need at least 101 votes, sparking a new search for a majority.

(Writing by Jan Lopatka; editing by Andrew Roche)

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Turkey's Erdogan has eye on new, strong president's role

ANKARA (Reuters) - Turkish Prime Minister Tayyip Erdogan took a step towards extending his powers on Tuesday after his ruling AK Party presented a proposal to parliament for setting up a presidential system.

Erdogan, who has dominated Turkish politics since the party came to power in 2002, is widely viewed as wanting to consolidate his position by becoming the head of state in a presidential election in 2014.

The plan drew criticism from the opposition, however, with one politician saying it could lead Turkey into a "dark dictatorship".

Under the current system, the president is a largely ceremonial figure. The AK Party aims to create an executive presidency within the framework of a new constitution which the government says will advance Turkey's democratization.

Erdogan's plans will be challenged by other parties in parliament who fear such a reform will hand him too much power. However, the AK Party has a large majority in parliament which leaves it strongly positioned to push through reform.

"We presented a measure to the parliamentary speaker's office. Within that there is an AK Party proposal on the formation of a presidential system," Deputy Prime Minister Bekir Bozdag, a leading advocate of the reform, said.

"We think it is right to move Turkey to a presidential system which can establish strong leadership and create stability rather than disputes in the years ahead," he said.

The move coincided with an announcement from Erdogan that local elections would go ahead in March 2014 as scheduled. He abandoned an attempt to bring the vote forward by five months after failing to win enough parliamentary support for the plan.

An earlier date for local elections would have given him more time to prepare for the presidential contest in 2014.

Under the AKP proposal, the president would appoint ministers, who would not be members of parliament and there would no longer be parliamentary mechanisms such as confidence votes and censure motions, Bozdag said.

The proposal, presented to parliament on Monday evening, was expected to be sent to an all-party parliamentary commission formed after last year's election to work on a new charter.

Opposition parties were fierce in their criticism.

"Turkey would walk into a dark dictatorship," said Riza Turmen, a deputy from the opposition Republican People's Party.

"Turkey is already on this path. The parliament is unable to fulfill its duties even in a parliamentary system. The judiciary is not independent, the press is not free," he told Reuters.

The nationalist MHP also rejected a move to a presidential set-up, calling for a strengthening of the parliamentary system.

ERDOGAN "LOSING HOPE" ON CONSENSUS

The AK Party has yet to spell out exactly what its reform plans are but Erdogan is expected to seek the presidency in the 2014 vote as under party rules he cannot run for prime minister again when his term ends in 2015.

He was reported as saying last Friday that he was losing hope of building cross-party support for the constitutional reforms but that he was determined to push the plans forward.

His Islamist-rooted party, which trounced the opposition in three parliamentary elections, has transformed Turkey during its decade in government, creating unprecedented prosperity and bringing a staunchly secular military to heel.

At his party congress in September, Erdogan said he would forge a constitution that would boost political freedom and democracy to replace one drawn up after a military coup three decades ago.

He invited opposition parties for consultations but opponents fear the new system would hand too much power to a man whose intolerance of dissent is viewed with increasing concern in Turkey and abroad.

Hundreds of activists, lawyers, politicians, military officers and journalists are being held on charges of plotting against the government or supporting outlawed Kurdish militants.

One obstacle to Erdogan's presidential ambitions could be the current president himself.

A survey by Turkish pollster MetroPOLL in September showed Turks would prefer incumbent Abdullah Gul as their next president.

The two men, who co-founded the AK Party in 2001 but could in theory face each other in the presidential election, have had increasingly public differences.

(Writing by Daren Butler; Editing by Angus MacSwan)

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