Czech Prime Minister Bohuslav Sobotka announced his shock resignation Tuesday in a high-stakes row with billionaire finance minister, Andrej Babis, a popular political rival tipped to win elections later this year.
"I will shortly -- probably this week -- present my resignation to President Milos Zeman," Sobotka said.
Sobotka explained his decision was a way " to free the hands of coalition parties so they can launch negotiations on a solution to the situation or agree on the organisation of earlier elections."
He also made it clear his cabinet would go with him.
"It is unacceptable for Andrej Babis to stay on as finance minister," Sobotka said, amid allegations of conflict of interest over the tycoon's business activities.
Last week Sobotka asked Babis to clarify past use of some 55 million euros ($60 million) worth of tax-free bonds in connection with his farming conglomerate Agrofert -- an affair that has raised questions about tax evasion.
"Everyone must play by the rules. Minister Babis is embroiled in a massive conflict of interest," Sobotka told reporters.
Ranked by Forbes as the Czech Republic's second wealthiest citizen, Babis has flatly denied any wrongdoing and labelled Sobotka's decision "absolutely tragic" and "desperate."
"I have always acted in line with the law," Babis insisted Tuesday.
His popular centrist ANO party is riding high in opinion polls, scoring 33.5 percent support compared to just 16 percent for Sobotka's CSSD party, in a survey conducted by the pollsters CVVM in April.
"Perhaps he has nothing to do, but I still have some work to do myself," Babis quipped.
In office since 2014, Sobotka's leftist CSSD shares power in a three-member coalition government with Babis's ANO and the smaller centre-right KDU-CSL Christian Democratic parties.
Presidential spokesman Jiri Ovcacek declined to make any immediate comment. Under the Czech constitution, there is no deadline for the president to accept the government's resignation.
The next regularly scheduled general election is set for October 20-21, three months ahead of a direct presidential poll.
Contacted by AFP, political analysts in Prague said that an early election was unlikely to be called during the summer, pointing instead to the possibility of a minority caretaker government being installed until the October ballot.
Analysts were caught off guard by the prime minister's surprise resignation, having rather expected that he would sack Babis.
"If I had proposed he be dismissed, I would have turned him into a martyr," said Sobotka, quipping that Babis had been "working hard to get ready for this role for several days."
Babis ran the sprawling Agrofert conglomerate before putting his assets into a trust earlier this year to ward off conflict of interest allegations.
He is also the Czech Republic's most popular politician with a 56 percent approval rating, according to the April CVVM survey, compared to 39 percent for Sobotka in sixth place.