By Gergely Szakacs and Krisztina Than

BUDAPEST (Reuters) - Hungary's President Pal Schmitt resigned on Monday after a plagiarism scandal, eliminating a potential distraction to his allies in the government as they try to win funding from international lenders.

An opposition party had considered trying to impeach him as he could only be removed from the largely ceremonial post by a two thirds majority in parliament, which the ruling Fidesz party holds. Hundreds of protesters had also called for him to quit.

Analysts had said the row could have become increasingly unpleasant for the government as it tries to resolve a lengthy dispute with the European Union that has held up funding from the bloc for central Europe's most indebted country.

The two-time Olympic gold medal-winning fencer had an instrumental role in pushing the agenda of Prime Minister Viktor Orban's government, signing controversial reforms, such as retroactive taxes, into law.

After saying last week he would not quit after a university panel stripped him of his sports doctorate, Schmitt announced he would resign on Monday, becoming the first president in Hungary's post-communist history to quit the post.

"When my personal issue divides my beloved nation rather than unites it, it is my duty to end my service and resign my mandate as president," Schmitt told parliament.

Lawmakers later voted overwhelmingly to rubber-stamp his departure less than two years into his term.

Schmitt was stripped of his sports doctorate after the university found he had copied chunks of his thesis without proper acknowledgement, a charge he denies.

"He should have made this decision long ago," Adam Ver a 32-year-old academic said, walking outside the parliament building. "It looks like this is not a country without consequences after all, so I can only welcome the decision."

SUCCESSOR

The resignation poses no risk to the government and parliament has 30 days to find a successor. Speaker Laszlo Kover will serve as interim president.

Peter Kreko, an analyst at think tank Political Capital, said Schmitt's successor would likely act in his footsteps and support the Orban government's policies.

"The person holding the office will change, but it will not trigger any change in the operation of the system," he said.

Despite his everyman charm, Schmitt could not connect with voters, many of whom derided what they saw as his lack of autonomy in signing bitterly contested reforms into law, in line with his inaugural pledge to be the "engine" of Orban's agenda.

Schmitt presided over the passage of a new constitution and about 300 new laws, some of which sparked a dispute with Hungary's international partners and the EU, hampering its bid for vital financial aid to avert a market crisis.

Budapest's Semmelweis University revoked Schmitt's doctorate last week, after its inquiry found his 1992 thesis, "An analysis of the program of Modern Olympic Games", had not met scientific and ethical standards.

The university's decision went further than suggested by the findings of its investigative committee, which said while Schmitt's 215-page thesis contained "unusually large amounts of verbatim translation", it met the formal standards of the time.

Schmitt, a former Fidesz party vice president, said he would appeal the ruling on the grounds that the university had no jurisdiction in the matter and only a court could revoke his doctorate.

"The process was unethical and unlawful," Schmitt told parliament.

"Naturally, I will appeal this decision and I will seek justice through the courts. For some, this is a political question. To me, it's a matter of honor."