* PM says ready to agree a caretaker cabinet
* Opposition says closer to a deal
* Early elections agreed to by Oct. 20
(Adds PM comments, background, market reaction)
By Robert Mueller
PRAGUE, March 31 (Reuters) - Outgoing Czech Prime Minister
Mirek Topolanek agreed on Tuesday to an opposition demand for a
new government of non-politicians that would lead the country to
an early election.
He dropped a demand to stay on as premier, and the main
opposition leader said he now hoped for a final deal this week.
"In the name of reaching wide political consensus we are
ready for the creation of a cabinet of non-partisans, with the
support of all democratic parties," Topolanek told a news
conference.
The Czech Republic has been in political turmoil since a
no-confidence vote last week toppled his minority centre-right
government.
Its collapse has undermined the country's position as the
holder of the rotating EU presidency, strengthened the role of
Eurosceptic President Vaclav Klaus and raised doubts about
ratification of the EU's Lisbon treaty.
Opposition leftist Social Democrat chief Jiri Paroubek was
optimistic on a deal. Asked if the parties had moved closer to
an agreement, he said:
"I think so ... If there is continuity in the negotiations
from the government parties, then the Social Democrats are
interested in a very quick solution, by the end of this week,"
he told reporters.
With neither the outgoing coalition nor the leftist
opposition commanding a majority in parliament, an agreement is
needed to form a viable new cabinet.
Paroubek said a new cabinet may be installed within weeks,
still during the Czechs' EU presidency which runs until June.
Topolanek said there were other options -- his cabinet could
leave in early May at the earliest, after the parliament
approves measures to fight the economic downturn, but it could
also last until the early election.
The crown currency firmed after Paroubek's statement, and
traded at 27.335 to the euro <EURCZK=> at 1345 GMT from 27.460
ahead of the news.
The Czech political crisis is the result of personal
rivalries and defections from the government camp over the past
months and has less to do with the global financial crisis that
fell governments in Hungary and Latvia.
The country has seen a drop of more than a fifth in
industrial output and exports, but its banks have been stable
and the currency recovered from losses seen earlier this year,
thanks to low overall debt and low exposure to foreign credit.
Showing a willingness to cooperate, the Social Democrats and
Topolanek's right-wing Civic Democrats were in talks on Tuesday
on a compromise on tax cuts and other measures to help ease the
impact of the global economic crisis.
NO NAMES
Paroubek did not say who should lead the new cabinet, but he
said it should consist of non-partisan experts.
He added there had been an agreement with the Civic
Democrats to hold an early election by Oct. 20, ahead of regular
polls due in mid-2010.
The Social Democrats lead opinion polls but the Civic
Democrats have been gradually catching up since Topolanek took
the EU presidency.
A failure of the main parties to reach an agreement on a new
government now would open the room for President Klaus to
appoint a prime minister of his choice.
Some commentators said this may be a Eurosceptic figure who
could block the approval of the EU's Lisbon treaty, meant to
streamline decision-making in the bloc, in the upper house of
parliament.
Such a cabinet may not win confidence in parliament but it
would stay on until a new administration is formed or until an
election.
(Writing by Jan Lopatka)
