* PM investigated for alleged European subsidy fraud
* Second hit to Babis after EU probe into conflict of interest
* Coalition partner says not leaving government over cases (Adds Babis, coalition partner)
By Jan Lopatka
PRAGUE, Dec 4 (Reuters) - Czech Prime Minister Andrej Babis will be investigated further for fraud in a case involving European Union subsidies, the top state attorney said on Wednesday, reversing an earlier decision to drop the matter.
Babis, a billionaire businessman, had been investigated on suspicion of illegally tapping 2 million euros in subsidies to build a conference centre outside Prague a decade ago, before he entered politics.
He denies doing anything illegal and says the case it politically motivated.
Opposition parties have called for Babis to quit, but his position seems solid for the time being, with public support holding steady and his coalition partners saying they have no reason to reconsider their participation in government.
The core of the criminal probe is an allegation that Babis, the country's fourth-richest person on Forbes list, had hidden the ownership of the conference centre and hotel and so it would qualify for EU funding meant only for small businesses.
Supreme State Attorney Pavel Zeman said the investigation that had been halted did not go far enough in establishing and evaluating facts, and sent it back to the Prague prosecutor for further inquiries and a new ruling.
"Said simply, at this point the state of the evidence is not sufficient for the matter to be brought to indictment or dropped," said Zeman, who answers to the government and can be dismissed without notice.
Babis said he was not surprised given pressure by the media and others, but he believed the case would be halted eventually.
"I repeat I did nothing illegal. Every reasonable person understands that the whole case is made-up, it appeared only because I am in politics," he told reporters.
The decision is the second setback for Babis this week.
Earlier, Czech media reported that European Commission had found a conflict of interest on Babis's part as prime minister and as beneficiary of trust funds holding his chemicals, media, food and other assets, which received various EU subsidies that may have to be returned.
Babis has repeatedly said he met obligations over the conflict of interest laws. The European Commission has said it sent the audit results to the Czech authorities, but that the contents were confidential as the audit procedure was ongoing.
(Reporting by Jan Lopatka; Additional reporting by Jan Schmidt and Robert Muller; Editing by Gareth Jones)