Ukraine's Yanukovich moves to tighten grip on power

KIEV (Reuters) - Ukraine's government faces a vote of no-confidence Wednesday as newly elected President Viktor Yanukovich moves to oust arch rival Prime Minister Yulia Tymoshenko and consolidate power.

The crisis-hit country's ruling coalition collapsed on Tuesday, almost a month after Yanukovich's victory over Tymoshenko in a presidential run-off that could tilt the former Soviet republic back towards Russia.

Tymoshenko, co-architect of the pro-Western Orange Revolution of 2004, has refused to recognise Yanukovich's victory, but no longer commands the support of myriad factions in Ukraine's dysfunctional ruling alliance.

The collapse of the coalition suggests the vote of no-confidence will pass. Both must happen for Yanukovich loyalists to begin the process of creating a new government.

Weeks of horse trading are expected. The various parliamentary factions have 30 days to form a new coalition and 60 days to form a new government.

If they fail, Yanukovich has the right to call a new parliamentary election -- a scenario feared by investors because it would prolong uncertainty for months as Ukraine continues to struggle without foreign lending.

"Everything possible must be done to form a new coalition," said Anatoly Tolstoukhov, a lawmaker from Yanukovich's Regions Party. "Ukrainian politicians always stand on the crossroads, and as a rule choose their path at the very last moment."

Ukraine desperately needs political stability to tackle a debilitating economic crisis that saw GDP contract by 15 percent in 2009, and to restart talks with the International Monetary Fund on a $16.4 billion bailout package.

Deputy Finance Minister Oleksander Savchenko said Tuesday he did not expect IMF funds to be freed up before the second half of the year. He said that left a hole of $3-5 billion per quarter that Ukraine will need to fill to cover government spending and debt payments.

Tymoshenko would normally be expected to stay on until a successor is named even if she loses the no-confidence vote, but the fiery 49-year-old indicated Tuesday she may not stick around.

Her immediate departure would spell further uncertainty for the country of 46 million people, a key transit country for Russian gas heading to western Europe.

(Writing by Matt Robinson; editing by Noah Barkin)