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Prime Minister Stanislav Gross has held talks with Jan Kohout, the Czech ambassador to the European Union. The latter said after Friday's meeting that the two men had discussed the possibility of Mr Kohout, a career diplomat, replacing Mr Gross as prime minister.

On Thursday the prime minister said he would step aside to allow a new government of his Social Democrats, the Christian Democrats and the Freedom Union to form under a different leader.

Mr Gross has been under pressure for some months over a scandal involving his family's finances, and his government is hanging by a thread, with several ministers having resigned and more threatening to follow.

Unemployment in the Czech Republic stood at 9.4 percent in March, according to figures just released by the Labour Ministry. The new figures represent a slight drop on February, when unemployment was at 9.6 percent. Some 540,000 Czechs are now out of work. The number of applicants per job is now 10.1, the lowest number in three years.

Meanwhile, year-on-year inflation in March fell to 1.5 percent, the lowest rate since December 2003.

Prime Minister Stanislav Gross has for the first time admitted he might step down to allow the formation of a new government with a different leader. Mr Gross's government currently hangs by a thread, ravaged by the loss of its majority and the resignation of five ministers and more threatening to follow after a row in the ruling coalition over the prime minister's private finances boiled over. Mr Gross offered his resignation after a meeting of his leftist Social Democrats but said he would resign only if such an agreement on a new administration could be reached with the rightist Freedom Union and centrist Christian Democrats.

The acquisition of Cesky Telecom by the Spanish telecoms giant Telefonica and its further ambitions in Europe have drawn mixed reviews from market analysts, the AFP agency wrote. The ratings agency Standard and Poor's said the price of 3.5 billion dollars agreed upon for Cesky Telecom was high in light of the latter's limited growth prospects and the absence of major cost advantages. On the other hand, an analyst at the Belgian-Dutch bank and insurance group Fortis described the purchase of Cesky Telecom as a positive step in a country "that is going to be one of the principal beneficiaries" of EU cohesion funding following its admission last May to the European Union. Telefonica head Cesar Alierta last November expressed a desire "to create the world's largest and best integrated company" in the telecommunications sector.