UPDATE 1-Moldovan PM's move threatens ruling coalition with collapse

* Alliance has ruled small ex-Soviet republic since 2009

* Three-party coalition plagued by back-biting and feuding

* PM Filat breaks out of founding coalition agreement (Adds Lupu comments)

By Alexander Tanas

CHISINAU, Feb 13 (Reuters) - The pro-Western bloc that has run Moldova since 2009 appeared headed for collapse on Wednesday after Prime Minister Vlad Filat denounced the founding coalition agreement and accused his allies of corruption.

The implosion of the three-party Alliance for European Integration could trigger a snap election and slow the ex-Soviet republic's progress towards agreements on political association and free trade with the European Union.

Such turmoil could also hurt an economy already weakened by falling European demand for major Moldovan products such as wine, and stall talks with the breakaway Transdniestria region.

Filat, leader of the Liberal Democratic Party (LDP) and prime minister since 2009, said his party would no longer adhere to the coalition deal with its partners, the Liberal Party and the Democratic Party.

"LDP urges its coalition allies to review this document," Filat told reporters, saying Moldova was turning into an oligarchy run by a privileged elite.

"While we have been running the country, some have used their power as a cover for restoring communist-era schemes ... I can compromise, but not when it comes to ... European values and fighting corruption," he said.

The coalition agreement splits important government and state positions in the nation of 3.6 million people between the three parties, an arrangement that Filat said needed to be excluded from a possible new deal.

Marian Lupu, head of the centre-left Democratic Party and parliament speaker, described Filat's declaration as "absurd".

Lupu said he would postpone the opening session of parliament which had been set for Feb. 14 since the Alliance now, in effect, had no majority.

"He makes his partners out to be devils but portrays himself as an angel, though he himself has sold his soul to the communists," said Lupu, accusing Filat of playing into the hands of the communist opposition by throwing into jeopardy the signing of a political association agreement with the EU.


Last month, Filat called for the resignation of Prosecutor General Valerii Zubco, an appointee of the Democrats, after a local pressure group accused Zubco of involvement in the death of a businessman on a hunting trip and a subsequent cover-up.

In an apparent tit-for-tat move, state prosecutors in turn launched abuse-of-office investigations against finance and health ministers - both of whom are appointees of Filat.

Escalating the stand-off, deputies from Filat's party on Wednesday supported a move to strip an influential businessman and the Democrats' main financial backer of his post as first deputy parliament speaker.

With communists indicating they would not form a new concord with Filat's party, the dispute could trigger an early election.

The Alliance took power in 2009 after the communists, who had ruled since 2001, failed to win a majority. Though it united all major non-communist groups, the Alliance's rule has been plagued by infighting, back-biting and stalemates.

Despite political instability, Moldova's legal reforms have won praise from the EU, which has launched negotiations on association and free trade deals which could be signed in 2013.

Moldova, one of the poorest nations in Europe with an average monthly wage of about $280, relies heavily on exports of goods including wine to the EU and remittances from its citizens working abroad, many of whom are in the EU. Growth fell to about zero last year due to a sharp decline in exports to Europe. (Writing by Olzhas Auyezov and Richard Balmforth; editing by Michael Holden)