Czech Prime Minister Andrej Babis' minority government lost a confidence vote Tuesday, forcing him to try to build a coalition with opposition parties as he battles allegations of subsidy fraud.
Promises to spearhead a cleanup of Czech politics helped Babis' ANO party win nearly 30 percent of the vote in a national election in October.
But he has become caught up in allegations he manipulated ownership of one of his companies a decade ago to win a 2-million-euro subsidy, mostly from European Union funds, meant for small businesses. He denies wrongdoing.
Babis was investigated and charged with fraud before the election, but he retained immunity from prosecution after being re-elected.
Tuesday's confidence vote was a first attempt by Babis to form a single-party government.
It came after a parliamentary committee recommended that his immunity be lifted, making a vote by the full legislature — which, if passed, would trigger a reopening of the fraud probe against him — likely in coming days.
The ANO lacks a majority in the lower house, and the allegations against Babis have so far made other parties reluctant to support him in forming a viable government.
Babis' cabinet must now resign but will remain in office pending negotiations. President Milos Zeman, who appoints prime ministers, has told Babis he would give him another try at forming an administration.
Several parties have signaled they might discuss governing with the ANO, especially if Babis himself was not prime minister, a condition he has so far refused to meet.
But parties may be tempted to reconsider by polls showing the ANO could score even better if fresh elections were called.
Babis, the country's second-richest person, remains popular with his message to strengthen the Czech voice in the EU, digitize government and cut taxes resonating among voters.
He calls the police investigation, which also targets his wife and grown children, a ploy by adversaries to chase him out of politics, which many Czechs believe is ridden with bribery and favoritism.