By Krisztina Than

BUDAPEST, April 28 (Reuters) - Hungarian Prime Minister Ferenc Gyurcsany is expected to reshuffle his cabinet on Monday after the smaller liberal government party voted to quit the ruling coalition, local news agency MTI said.

MTI, citing unnamed sources, said Gyurcsany will appoint Gordon Bajnai, who is in charge of European Union funds and regional development, as the new economy minister.

Bajnai, a young businessman, is seen as a close ally of Gyurcsany and has been named by some newspapers as a potential successor to the prime minister if he is replaced.

Analysts said Bajnai's appointment signals a commitment to the budget deficit cuts needed to get Hungary into the euro currency and to stabilise the country's economy.

It does not however show that Gyurcsany is ready to tackle difficult issues such as reforming labour, health and education in the remaining two years of the Socialists' term in office.

"The prime minister wants to signal a continuity in governing, but for a new beginning, a new programme would be needed along with new faces," says Zoltan Kiszelly, a political analyst.

Tamas Szekely, head of Hungary's national health insurance fund, is expected to get the post of health minister. He faces a tough challenge after reforms in the sector were stalled by an opposition-sponsored referendum last month which abolished medical fees, key elements of the reform.

It was the sacking of the health minister from the small Alliance of Free Democrats last month which caused the coalition to split.

Gyurcsany is also expected to create a new post for research and development, and there will be a changes at the environment, local government and labour ministries.

The departure on Sunday of the Free Democrats, who have 20 members in the 386-strong parliament, has caused concerns that the Socialists, with 190 seats, will return to their spendthrift ways ahead of elections due in 2010.

The government which held power in 2006 racked up a budget deficit of 9.2 percent of gross domestic product in that year and although the deficit has been cut to 5.5 percent of GDP it is still the biggest in the European Union.

A new survey on Monday showed the Socialists polling just 15 percent. (Reporting by Krisztina Than, editing by David Chance and Mary Gabriel)

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