Croatian Prime Minister Ivo Sanader unexpectedly resigned on Wednesday and said that he was withdrawing from active politics.

The announcement came as a surprise as Croatian media had speculated recently that Sanader would run for president in 2010, the BBC reported.

"I have decided to withdraw from active politics and not to run for the presidency. My job has been done, my political life ends now", Sanader said.

Sanader, head of the conservative Croatian Democratic Union, became prime minister in 2003 and won re-election in 2007. He made gaining Croatian membership of NATO and the European Union a key part of his time in office.

Croatian media reported that he recommended his deputy, Jadranka Kosor, as the best person to replace him.

Croatian President Stjepan Mesic said he was surprised by the timing of Sanader's resignation.

"Croatia is in a serious economic situation, while the talks on EU entry are stalled," Mesic said in a statement after meeting Sanader late on Wednesday.

"The crisis of the government does not contribute to the country's stability and will certainly draw question marks abroad."