By Martin Santa
BRATISLAVA, May 3 (Reuters) - The unity of Slovakia's ruling coalition will be tested in May when parliament repeats a secret ballot to elect new state prosecutor, which caused the worst row of Prime Minister Iveta Radicova's 10 months in office.
Radicova, facing a backbench revolt in parliament, has threatened to quit if parliament re-elects Dobroslav Trnka to the post.
The euro zone country's ruling coalition has experienced a series of disputes since Radicova took power last summer on promises to fight political cronyism, corruption, weak law enforcement and worsening trends in public finances.
The government lost a seat in March with the ousting of Igor Matovic from the liberal Freedom and Solidarity (SaS) party, reducing the coalition's ranks to just 77 in the 150-seat parliament.
Below are key political risks to watch:
SMALL MAJORITY, COALITION SQUABBLES
The coalition has had internal clashes over policy, including tax hikes proposed by the SaS, as well as the row over the election of a new state prosecutor.
The constitutional court decided that last year's vote for prosecutor breached principles of a secret ballot and ordered parliament to repeat it. Radicova said the vote will most likely take place on May 17.
What to watch:
-- Radicova said she remains firm in her threat to step down it ex-state prosecutor Trnka is re-elected with support from coalition deputies.
-- Rising tension in the coalition. The coalition is vulnerable to rebellions and the strongest opposition party SMER of ex-Prime Minister Robert Fico remains the most popular party.
-- The ousted SaS legislator Matovic has announced plans to establish a new independent political party which may lure away more government deputies. Matovic has however said he will not to try bring down the cabinet.
RESISTANCE TO ESM
SaS leader Richard Sulik said last month his party will not back the country's participation in Europe's planned permanent bailout mechanism, opening the possibility that Slovakia may not meet its financing quota.
What to watch:
-- Parliament will hold a vote by summer. Radicova needs to secure support from the opposition SMER to pass Slovak participation in the European Stability Mechanism (ESM).
-- A Slovak 'No' would put the euro zone country under heavy fire from its peers, similar to that experienced last year after Slovaks rejected participation in a bailout for Greece.
LABOUR CODE
The government approved an amended labour code, designed to boost labour market flexibility, ease administrative and financial burdens and create new jobs.
What to watch:
-- a debate on an amended labour code could trigger more clashes between employers and unions. Unions have said they are ready to stage new protests.
-- The parliament is expected to debate the amended law in the coming weeks and unions will try to change the proposed version, which curbs powers awarded by Fico's leftist cabinet.
SLOVAK-HUNGARIAN RELATIONS
The two neighbours have a history of discord, with Hungary accusing Slovaks of oppressing ethnic Hungarians, and Bratislava bristling at its former imperial master's efforts to promote Hungarian culture in Slovakia.
Hungarian Prime Minister Viktor Orban's Fidesz party plans to grant voting rights to ethnic Hungarians living abroad, a move which is likely to spark criticism from Slovakia.
Radicova's coalition includes the Most-Hid party, representing mostly ethnic Hungarians, which has acted as a moderating influence on the fractious relationship.
The coalition has struggled to agree a joint stance on whether to scrap or only soften a law stripping people of Slovak citizenship if they take the citizenship of another country.
What to watch:
-- Further action by both Bratislava and Budapest, details of the timeframe or nature of the new citizenship code and reaction from the Hungarian minority in Slovakia.
CORRUPTION, BUSINESS CLIMATE
The government says it wants to improve the business climate, crack down on corruption and boost law enforcement -- major concerns for investors in the past.
Transparency International's latest corruption perception index showed Slovakia ranked in joint 59th place in the world in 2010, lower than Central European neighbours Poland, Hungary and the Czech Republic.
What to watch:
-- The government has pledged to increase the transparency of public procurement projects, publish government tenders online and enhance the functioning of the courts to reduce delays.