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* Economy minister picked, five others declined nomination
* Tudose may unveil new cabinet on Tuesday
By Luiza Ilie and Radu-Sorin Marinas
BUCHAREST, June 26 (Reuters) - Romania's president named outgoing economy minister Mihai Tudose as prime minister on Monday, clearing the way for a new leftist-led government to be formed by the end of this week and end a political crisis threatening to sour investor confidence.
The Social Democrats (PSD) picked 50-year-old Tudose to replace Sorin Grindeanu whom they ousted last week in an internal party rift over anti-corruption policy.
PSD lawmakers voted out their own cabinet in a no-confidence motion on June 21, accusing Grindeanu of failing to implement an ambitious governing programme that helped them win a December election.
Analysts said many party members were unhappy with Grindeanu's failure to relax anti-corruption rules. His government had to withdraw a decree that decriminalised some graft offences after massive street protests in February.
PSD leader Liviu Dragnea said Tudose was one of six potential prime ministers the party considered. The other five had declined the position.
"Taking into consideration the current crisis, the urgency to end it ... as it harms the economy (and) Romania's external image abroad, I have decided to name Mihai Tudose as prime minister-designate," President Klaus Iohannis told reporters.
Tudose is expected to unveil his cabinet lineup on Tuesday and analysts said several of the outgoing ministers were likely to retain their posts.
Dragnea said a new government would be approved in parliament on Thursday in a vote of confidence supported by the ruling coalition which has about 10 seats above the required majority.
The rift has kept investors wary about Romania in recent weeks despite the eastern European Union state posting annual growth exceeding 5 percent in the first quarter.
Under a PSD premier, government policies would likely continue to bend towards the public sector wage hikes and tax cuts that have raised concerns of fiscal slippages with the European Commission and the International Monetary Fund, analysts said.
"We see no major shifts in government policies, except for the possibility of a bigger push for less stringent anti-corruption laws," Nordea analysts said in a note.
However, any further attempts by the ruling coalition to weaken anti-corruption legislation could reignite street protests.
Catalin Tenita, an IT entrepreneur who co-founded Geeks for Democracy, an online platform seeking projects to improve governance, protested throughout February. He said on Monday that he would take to the streets again if needed.
"It is difficult to predict what the ruling coalition will do, but the past has shown us they have consistently tried to weaken the fight against corruption," he told Reuters.
"Ideally, the new government, regardless of which party, would focus on citizens' real problems. I think the potential for protests is much higher than in February – more people are informed now and better organized."
Romania is the European Union's fastest growing economy but one of its poorest and most corrupt states, with massive investment needs in its underdeveloped transport, healthcare and education sectors. (Editing by Krisztina Than, Alison Williams and Richard Balmforth)