* Hard to defend Romania's position -infrastructure minister
* Romania may have to pay $2 bln damages to Canada's Gabriel
* Company aims to set up Europe's biggest open-cast mine
* Vote on project in parliament may be held on Sept. 17
Romania will have a hard time defending itself in court if it rejects plans by Canada's Gabriel Resources to set up Europe's biggest open-cast gold mine, the infrastructure minister said on Thursday.
Prime Minister Victor Ponta has said legislators are set to reject Gabriel's 14-year bid to build the mine due to mounting resistance from the public and from political leaders, and that parliament should prepare for an imminent vote.
Ponta says Gabriel may sue for up to $2 billion in damages if the mine project, which would use cyanide to extract gold and silver, is rejected. The company says the technology is safe.
The EU's second poorest member has needed international aid since 2009 after years of recession, and is in dire need of investment including in the mining, energy and farming sectors.
A vote in parliament has yet to be scheduled but political sources said it could be called as early as next Tuesday.
"If we block this investment, they will sue us. In case of a litigation, we won't have an easy position at all. This gold mine should be done," National Infrastructure and Foreign Investment Minister Dan Sova told a news conference.
Thousands of people in cities across Romania protested for days against a draft law submitted to parliament last month following a deal to raise gold royalties and lift the country's stake in Gabriel's Rosia Montana Gold Corporation project.
The protests have dwindled since Ponta spoke on Monday but hundreds of demonstrators are still gathering in central Bucharest each evening.
Dozens of miners trapped themselves in pits in Rosia Montana on Wednesday, some threatening a hunger strike to protest against the development possibly not going ahead.
Gabriel, whose largest shareholder - hedge fund Paulson & Co - has a 16 percent stake, said it may resort to legal action.
"Because Gabriel is listed in Toronto, all their business plans are certified. So that's pretty difficult a position for us ... they have invested $550 million so far," Sova said.
A member of Ponta's Social Democrat Party, which with the coalition Liberals controls two thirds of parliamentary seats, Sova said he would vote 'yes' to the project but, if his party decided to reject it, he would toe the party line.