PRAGUE, Jan 6 (Reuters) - Three Czech political parties signed an agreement on Monday to form a centre-left coalition and cabinet, aiming to shore up economic growth by easing a squeeze on government finances.
Politicians have been negotiating the formation of a government since an early election in October.
Under the agreement, Social Democrat leader Bohuslav Sobotka, 42, will become prime minister, returning his party to power after nearly eight years of centre-right rule in the European Union country.
The economy is barely beginning to grow after efforts to hold down state debt made consumers and companies cautious about spending, keeping the country in recession for most of the past two years. The coalition aims to keep the deficit below 3 percent of gross domestic product.
Sobotka now needs to convince President Milos Zeman to appoint his cabinet. Zeman has roots in the same party as Sobotka but has long been his political foe and has signalled he may refuse some of Sobotka's candidates for ministers.
The Czech Republic has suffered a string of weak governments, owing to a fragile parliament and frequent corruption scandals.
Sobotka's coalition will have 111 votes in the 200-seat lower house of parliament, but its stability is not guaranteed.
The biggest question mark hangs over the newly created ANO movement, which came second in the election under the leadership of businessman Andrej Babis, who based his campaign on people's anger with sleaze in the political establishment.
He is expected to take the finance ministry, which also raises questions over potential conflict of interest. Babis owns a web of over 200 companies, mostly in the chemical, agricultural and media sectors.
Sobotka has pledged to bring the country of 10.5 million back into the European mainstream after a cool approach to Europe by previous right-wing cabinets. But the country is not expected to adopt the euro before the end of this decade.