Andrej Babiš, Czech Republic’s scandal-plagued acting prime minister, has been reappointed in an attempt to end months of political deadlock by strong-arming reluctant opposition MPs into forming a government with him.

Babiš was officially rinstalled in a ceremony at Prague castle presided over by Miloš Zeman, the populist Czech president, who appeared to be attempting to use the possibility of a coalition with a far-right grouping to force the Social Democrat party (ČSSD) into agreeing a deal.

Babiš’s appointment, for the second time in six months, came a day after large crowds of demonstrators gathered in Prague and other Czech cities to protest against the prospect of a government led by him.

A billionaire businessman and Czech Republic’s ssecond-richest man, Babiš has been unable to form a stable administration since his Action of Dissatisfied Citizens party (ANO) won last October’s parliamentary election because mainstream parties have been unwilling to serve under him on grounds that he faces criminal fraud allegations.

Despite reservations, the Social Democrats last month agreed to enter a coalition on condition that Babiš resign as prime minister if convicted of the charges, which relate to a €2m (£1.75m) EU subsidy. He denies any wrongdoing. Last year he referred to the allegations as a “pseudo-case” and as a political plot against him.

The agreement is subject to approval in an internal members’ ballot, with the result due on 15 June. If confirmed, it would produce a minority coalition dependent on parliamentary support from the Communist party (KSCM), enabling it to wield political power for the first time since the 1989 Velvet Revolution that ended its 41-year rule over what was then Czechoslovakia.

By pre-empting the outcome of the Social Democrats’ poll, Zeman, who was narrowly re-elected in a bitterly fought presidential contest in January, appeared to be trying to intimidate members to stop them rejecting the coalition deal.

“He is trying to tell them that Babiš will be prime minister no matter what and if you don’t approve the coalition with him, he will have to enter one with the far-right and the communists,” said Jiří Pehe, a Czech political analyst who is director of New York University’s campus in Prague.

Zeman, who has gained a reputation for fierce anti-Muslim rhetoric, has openly touted a government consisting of ANO, the Communists and the anti-immigration Freedom and Direct Democracy party (SPD), led by Tomio Okamura. Last year Okamura hosted a conference of far-right leaders attended by Marine Le Pen, leader of the French Front National, and Geert Wilders, leader of the Dutch Freedom party.

The Slovak-born Babiš has so far baulked at striking such a deal, fearing it would damage his standing in the EU.