By David Chance

BUDAPEST, Nov 6 (Reuters) - Parliamentarians from Hungary's ruling Socialist government, stung by low poll ratings, want to rein in the fast paced economic reforms of Prime Minister Ferenc Gyurcsany but have no intention of an open revolt to unseat him.

The party's grassroots love the man who scored a stunning election win in 2006 and faced down violent protests after his admission he lied about the poor state of Hungary's finances but Socialist MPs are chafing at his high-handed style.

On Monday they staged a rare rebellion, voting down a minor tax bill in the latest of a series of rows with their smaller coalition allies, the Alliance of Free Democrats.

On Tuesday parliamentary speaker Katalin Szili, a vocal critic of Gyurcsany and mooted in the media as a possible replacement, again warned that the party had alienated voters and lost sight of left-wing values.

"Voices are not openly demanding Gyurcsany's resignation, but the criticism is now loud," said Krisztian Szabados at consultancy Political Capital who forecast that Gyurcsany would have at least until spring 2008 to turn things round.

Socialist MPs see opinion polls showing 15 percent support and panic but Gyurcsany believes his party can win re-election in 2010 only if Hungary swallows his bitter economic medicine and returns to strong growth.

Gyurcsany will likely to tough it out, and may not be challenged unless the Socialists lose heavily in 2009 European Parliament elections, but the uneasy situation is likely to keep markets on edge and dull the pace of future state reforms.

His reforms have slashed the budget deficit from 9.2 percent of gross domestic product last year, the biggest in the European Union, and put Hungary back on a path to the euro.

But much more must be done to modernise the ex-communist country's lumbering and expensive public services.

DISCIPLINED APPROACH

"The market firmly associates the big rise in Hungary's currency and bond prices since September 2006 with the disciplined implementation of the fiscal measures introduced by Gyurcsany's government," said David Lubin, an economist at Citigroup.

Gyurcsany can rub people up the wrong way and last year he upset many with a profanity-laden speech to shake his party into action, saying it could not carry on after lying "morning, noon and night" about the country's finances to win re-election.

Gyurcsany dominates the stage, making conservative opponent and former Prime Minister Viktor Orban look leaden and outdated, but he often refuses to compromise.

In response to a recent corruption case involving a former Socialist MP, he sought to stem graft in part by preventing MPs from holding mayoral posts where they can influence who gets government and EU money, a move which caused cries of anguish.

"Gyurcsany can be his own biggest enemy," said a former close aide who said that it would not be what Gyurcsany did as prime minister which could see him replaced, but how he handled the Socialist party of which he is also president.

In addition to conflicts with the Socialists, Gyurcsany has had to smooth over disagreements with his coalition partners, the Free Democrats.

Rows between the two parties over health and tax reform have at times created the impression the coalition is about to fall.

Those disagreements are caused in large part by the need of the liberals, who are polling just one percent, to differentiate themselves in the minds of voters from the Socialists with whom they have been allied since 1994.

While the Socialists may be wary of Gyurcsany's leadership and the Free Democrats doubtful of quite how far their Socialist partners are willing to go in embracing economic reform, they are united in their loathing of Orban.

Orban, prime minister between 1998 and 2002, has kept a tight grip on his party despite losing two elections, rotating personnel seemingly to prevent a challenger emerging, but the price has been that the party has had few new ideas. (Editing by Stephen Weeks)

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