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Czech Republic: Currency Falls After Prime Minister Resigns

Prague, 1 December 1997 (RFE/RL) - The Czech currency fell further today amid a political crisis sparked by yesterday's resignation of Prime Minister Vaclav Klaus and his entire cabinet over allegations of funding irregularities. Czech President Vaclav Havel yesterday accepted the resignation of Klaus' three-party coalition government, but said the entire cabinet would remain in office as caretaker until a new one is formed.

The Czech crown fell sharply against the U.S. dollar and the German mark today as financial markets responded to Klaus' resignation.

The Czech currency opened today at 35.25 crowns per dollar -- down from 34.4 crowns late Friday. By early afternoon, private traders in Prague were selling dollars for more than 36 crowns. One dollar had cost slightly more than 32 crowns just three weeks ago.

Market analysts predict strong pressure on the crown in coming days as Prague's political uncertainty continues. The Czech National Bank says it will protect the crown from sharp devaluations. But bank spokesman Martin Svehla refused to comment on rumors among traders that the central bank had already intervened today.

Meanwhile, the front pages of all the Czech Republic's daily newspapers were devoted to the resignation story. "Mlada Fronta Dnes," the country's most widely read daily, said Klaus had made a "significant" contribution to the growth of the free market economy and political plurality in the Czech Republic. At the same time, "Mlada Fronta Dnes" said it is now essential to find a new prime minister as quickly as possible -- a task it said would not be easy.

Havel said discussion of a new government will have to wait until after a special congress of Klaus' Civil Democratic Party (ODS) opening December 13 that is to decide on the leadership.

Klaus says he will not serve in the next cabinet but does plan to run for re-election as party leader. Klaus added he had been forced to resign and perceived no benefit to the country in doing so now, especially ahead of talks on the Czech republic's entry into NATO and the European Union, and the need to approve the 1998 budget.

Havel earlier today indicated support for a technocrat government. But after meeting the coalition leaders he said his vision so far does not enjoy general support. The leadership of the Social Democrats, the strongest opposition party, called for early elections -- a move so far rejected by Havel.