Vladimir Putin and Dmitry Medvedev speak before a meeting with members of the government in Moscow on Wednesday. Reuters

Hours after Russian President Vladimir Putin proposed a referendum on a package of reforms to country's constitution, the government resigned.

Russia Prime Minster made the shocking announcement in a televised speech saying that Putin's proposals would make significant changes to the country's balance of power and so "the government in its current form has resigned."

"We should provide the president of our country with the possibility to take all the necessary measures to carry out the changes," Prime Minister Dmitry Medvedev said.

"All further decisions will be taken by the president."

Putin asked Medvedev, his longtime ally, to continue as head of government until a new government has been appointed.

"I want to thank you for everything that has been done, to express satisfaction with the results that have been achieved," Putin said.

"Not everything worked out, but everything never works out."

He also proposed creating the post of deputy head of the Security Council, suggesting that Medvedev take on the position.

Earlier Putin said proposed package of reforms to Russia's constitution that would strengthen the role of parliament.

The changes would include giving parliament the power to choose the prime minister and senior cabinet members, instead of the president as in the current system.

Agencies