Deputy Prime Minister Karolina Peake said she had enough supporters behind her new faction to stabilize the government, Radio Prague reported.
Czech Prime Minister Petr Necas said the leaders of the three parties in the ruling coalition -- the Civic Democratic (ODS), TOP 09 and the Public Affairs (VV) parties -- had decided to terminate the governing pact as of Friday, the Czech news agency CTK said.
Peake left the VV last week and has been trying to forge a new group that would allow the government to continue, Radio Prague said.
With the support of Peake's faction, the government would have a narrow majority of 102 votes in Parliament, the network said.
Necas has said he would hold early elections in June if his government did not find a clear majority in Parliament Monday.
Up to 90,000 people rallied in Prague Saturday against the Czech Republic government's new austerity measures, organizers said.
The protesters, organized by unions and civic groups as part of a Stop the Government campaign, gathered outside union headquarters and then marched to Wenceslas Square for a rally where they called for the resignation of Necas and his ruling the Civic Democrats.
Other protests erupted across the country during the weekend over $3.02 billion being cut from the Czech budget, The New York Times reported.
"We have achieved much, but there is little confidence in politics," said Tomas Sedlacek, a leading economist. "People are just exhausted with all the corruption and the divisions consuming this current government."