Czech Prime Minister Jan Fischer resigns

PRAGUE (Reuters) - Czech President Vaclav Klaus accepted the resignation of caretaker Prime Minister Jan Fischer on Friday but asked him to stay on until a new cabinet takes power following a May election.

The resignation, required by law, came after the opening session of the new lower house this week and allows Klaus to appoint a new prime minister, which will almost certainly be right-wing Civic Democrat Petr Necas.

Necas is leading coalition talks with two other centre-right parties, TOP09 and Public Affairs, after the three won a combined 118 seats of 200 in a May 28-29 general election.

Necas has said he wants a deal by early July so a new government can prepare a cost-cutting 2011 budget.

Fischer and his caretaker cabinet took power in May 2009 after a previous centre-right cabinet collapsed halfway through the country's stint at the European Union presidency.

"This government was created in a very complicated situation," Klaus said after meeting Fischer. "I think it is certainly possible to say it fulfilled its role."

AUSTERITY MEASURES

At the height of the economic crisis in central Europe, the cabinet pushed austerity measures through parliament to try and cut the fiscal deficit to a planned 5.3 percent of economic output in 2010, from 5.9 percent in 2009.

The three centre-right parties won the May election with pledges of austerity and plans to battle corruption and have pledged to cut the fiscal gap to at least 4.8 of GDP in 2011.

Investors, analysts and rating agencies cheered the centre-right victory as the best possible outcome from the election, and the most likely grouping to kick-start needed reforms in pensions and healthcare -- areas in which the country of 10.5 million has lagged behind neighbours in the past.

They have yet to agree on specific details how to cut the budget gap but are all against any major tax hikes.

(Additional reporting by Robert Mueller, writing by Jason Hovet)

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