The Czech government and opposition leaders may reach a deal on a caretaker government and an early election on Sunday, outgoing Prime Minister Mirek Topolanek said on Friday.

Topolanek's centre-right minority government is leaving after a no-confidence vote last week, halfway through the country's six-month European Union presidency term and just ahead of U.S. President Barack Obama's visit for an EU-United States summit in Prague this weekend.

"All the parameters (of an agreement) are up for discussion, and we will hold a definitive discussion on Sunday. I felt willingness to reach some conclusion on Sunday," Topolanek said after meeting opposition chief Jiri Paroubek.

The success of the no-confidence motion undermined the Czech EU presidency and increased the power of euro-sceptic president Vaclav Klaus, a strong opponent of the EU's Lisbon treaty ratification, who will appoint the new prime minister.

Topolanek and the Social Democrat chief Paroubek have been hammering out a deal to form a cabinet to lead the central European country ahead of early polls in mid-October and enact measures to fight an economic downturn.

Neither or Topolanek's three-party coalition, led by his right-wing Civic Democrats, nor the left has majority in the lower house, and the two need to agree on any new government or policy to avoid being dependent on a handful of defectors from both camps who hold the middle ground. They seemed to be near to clinching a deal earlier this week but protests within Topolanek's right-wing Civic Democrats threw doubt on the outcome.

The new government is likely to consist of mainly non-partisan experts and no candidates have been named for prime minister, whose tasks are likely to include chairing the European Union summit in June. The exact date of Topolanek's departure has not been determined, but he is expected to go before the summer.

Analysts also forecast looser policy as the election nears.

The main parties have agreed to negotiate on proposals to help smooth out the economic downturn, and on Friday the lower house gave preliminary approval to cuts in taxes and faster asset depreciation, measures aimed at helping corporate cash flow amid a sharp economic downturn.