Croatia's President Stjepan Mesic must name a new prime minister after the surprise resignation on Wednesday of Ivo Sanader, who proposed his deputy Jadranka Kosor form the new government.

Here are some possible scenarios:

KOSOR BECOMES NEW PRIME MINISTER

* The most likely scenario. The 56-year old Kosor has been among the most loyal party supporters of Sanader ever since he came to power in 2003. According to Sanader, Kosor has already secured enough signatures of parliament deputies to be given a mandate to form the new government.

Analysts fear she might lack political clout to enforce painful reforms needed to sort out a staggering economy and break a six-month deadlock in EU accession talks.

Some leaders of the ruling conservative Croatian Democratic Union (HDZ) said a new cabinet might be formed as early as on Friday, but President Mesic may take his time and talk to all parliamentary leaders before making the decision.

KOSOR FAILS TO FORM THE GOVERNMENT?

Seems unlikely at the moment as virtually all junior partners in the ruling coalition have already expressed support for the new government. However, they said fresh talks about the cabinet's make-up will be needed, which might prolong formation of the new government.

GOVERNMENT IS FORMED, FAILS TO FIX BUDGET

Most analysts agree that tackling the strained public finances will be one of the most challenging and pressing tasks for the new cabinet. Some believe Croatia will not be able to enforce enough spending cuts to avoid turning to the International Monetary Fund for help.

The budget revision is expected by September at the latest and should include severe cuts in the currently abundant state subsidies and welfare funds.

A similar difficulty is expected when the government seeks parliamentary approval for a leaner 2010 budget.

Unless the proposed budgets are approved, the government will be forced to step down.

EARLY ELECTIONS?

President Mesic must call early elections if a new government is not formed within 30 days after he names a new prime minister-designate.

The main opposition parties already called for early elections saying that any new government needs to be confirmed by the electorate.

Internal rifts in the ruling coalition may also threaten the government unless Kosor manages to smooth over their differences, like Sanader did. In that case, early elections are a likely option.

Next parliamentary elections are scheduled for late 2011 and presidential elections for early 2010.