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The Czech government has approved a proposal for a new constitutional law that would allow ordinary citizens hold referendums on important internal and foreign state policy. Under the bill, a referendum could not be held on issues that question constitutional principles and fail to respect the country's international obligations. Citizens would, however, be able to vote on the European constitution, which has to be ratified by all EU member states before October 2006. In order to be passed, the bill has to be supported by 120 of the 200 deputies in the lower house and three fifths of Senators.

The Czech crown hit a historic high against the US dollar of 21.90 crowns on Wednesday. It also reached a 2.5 year high against the euro when it stood at 29.29 to the single European currency. The Czech National Bank said on Wednesday it was considering intervening against the strong crown.

Prime Minister Stanislav Gross has said he sees no reason for the government to initiate a vote of confidence in Parliament following the protracted government crisis. After a meeting with senior party officials, Mr. Gross told journalists that his Cabinet was fully functional and capable of meeting the challenges ahead. The Prime Minister also reiterated his intention to run for the post of party chairman at the upcoming party conference in March. Mr. Gross told journalists he was not considering leaving either of his posts - party chairman or prime minister. The ruling Social Democrats have been under pressure to ask Parliament for a vote of confidence and to choose a new party leader at their March conference.

The largest opposition party, the right-of-centre Civic Democrats, have said they expect the coalition government of Prime Minister Stanislav Gross to ask the lower house of parliament for confidence. Otherwise they said they will call a no-confidence vote in the government after the Easter national congress of the ruling Social Democratic Party at which Prime Minister Gross will seek election as party chairman. The Civic Democrats have been critical of the recent row within the governing coalition and suggested early elections as the only way out of it.

The government crisis had been caused by Prime Minister Gross's failure to provide a plausible explanation of how he financed a Prague apartment five years ago and how his wife funds her business. The controversies triggered a row between the two biggest coalition parties: the Christian Democrats called on the Social Democrat Prime Minister to step down and Prime Minister Gross in turn threatened to ask the President to sack the three Christian Democrat ministers. The Social Democrats now consider the government crisis to be over, after they gave the strong backing to Prime Minister Gross on Saturday and after he made a public apology for his statements in connection with the row.