* Social Democrats win majority in parliament's upper house
* Say they will oppose budget cuts
* But cannot seriously derail cabinet's austerity drive
By Jana Mlcochova
PRAGUE, Oct 23 (Reuters) - The leading Czech leftist party the Social Democrats secured a majority in the parliament's upper house in an election on Saturday and said it would use the power to oppose the cabinet's austerity drive.
The vote, along with a municipal election last weekend, was seen as the first test for the country's three-party, centre-right coalition government and its retrenchment plans opposed by public sector workers.
"This election clearly signals that a large part of the public does not agree with the planned reforms," Social Democrats leader Bohuslava Sobotka told a news conference.
"A large part of the reforms are controversial and I think people came to the election to give the government a clear signal that they do not agree with its policy and that the government should change that policy."
The cabinet has agreed a 45 billion crown austerity package to cut the 2011 public sector gap to 4.6 percent of GDP from 5.3 percent expected this year.
The budget cuts, which include reductions in the public sector wage bill, and were criticised by trade unions, must come into force as of January so that the 2011 budget can be applied.
Sobotka added the Social Democrats would "object against the reforms on the Senate floor".
READY TO NEGOTIATE
Civic Democrats leader and Prime Minister Petr Necas said he was ready to negotiate with the Social Democrats about the reforms but admitted there would be a delay.
"We have to openly admit that the legislative process will be longer and more complicated, that's a reality," he said.
Voting for a third of the 81 seats in the parliament's upper house helped the Social Democrats win a 41-seat majority in the chamber by winning 12 of the 27 open seats.
The main rightist party the Civic Democrats, which leads the cabinet, lost 11 seats, shrinking their ranks in the upper house to 25 seats.
The other two coalition partners performed poorly. The conservative TOP09 lost four seats to keep three, and the centrist Public Affairs won no seat and have no senator in the chamber.
The left-controlled upper house will probably reject the cuts but the lower house, in which the government coalition parties hold 118 of 200 seats, can override Senate vetoes.
The Senate can delay bills by up to 30 days before returning them to the lower house and analysts said approval of the bills in January meant no serious threat for the budget, only some delay.
"The Social Democrats could delay approval of the legislation needed for the budget, there can be a procrastination possibly until January," said Michal Klima, political scientist at Metropolitan University in Prague.
"But otherwise, the Senate is (only) a kind of a safety net, a direct influence on the approval of the budget ... is not among its roles."
The government needs a Senate approval on issues such as changes in the Constitution or sending troops to NATO missions abroad, in which the lower house does not have the power to outvote the Senate.
The centre-right parties won the May parliamentary election on retrenchment pledges to ease the state deficit and debt load, and to clean up corruption. The coalition has pledged to bring the gap to within the EU's 3 percent ceiling by 2013.