Portugal to have caretaker government till February vote

Portugal will have a caretaker government until snap elections are held on February 20.

Prime Minister Pedro Santana Lopes, whose Social Democrats trail the opposition Socialists in opinion polls, resigned with his cabinet on Saturday after less than five months in office.

The centre-right coalition quit to avoid squabbles with President Jorge Sampaio, who dissolved parliament on Friday and set elections, saying he lacked confidence in the government.

Mr Santana Lopes's brief tenure was marked by a minister's resignation, slumping polls, a negative outlook from the Standard & Poor's credit rating agency, and allegations of government interference with the media.

He is due to meet Mr Sampaio today to formalise the resignation and caretaker government.

"This can only be management of day-to-day issues. The thing that is clear is that it (the caretaker government) can't carry out structural things," said Albano Santos, a professor at the Institute for Superior Finance and Tax Studies.

Defining what is structural could be difficult. Parliament, for example, has budgeted pay rises for public workers of 2.2 per cent next year, but the government has not concluded wage talks with unions.

The Finance Ministry also said last month it would transfer state company pension funds to its general pensions account to keep the 2004 budget deficit inside the euro zone limit.

The wage talks and the pensions transfer could fall into "a grey area", Mr Santos said.

Portugal has had some half-dozen caretaker governments since a 1974 revolution that overthrew a rightist dictatorship. The last one, headed by Socialist Antonio Guterres, lasted four months until elections in March 2002.

Vital Moreira, head of the Centre for Studies of Public Law and Regulation at the University of Coimbra, said the government would be barred from issuing decrees and naming executives to public companies.

An announced Defence Ministry contract with Canada's Bombardier Inc to build armoured vehicles at a closed Bombardier plant will also be halted, he told Publico newspaper.

Portugal's stock market has reacted little to the crisis. The benchmark PSI20 index dipped on December 1, the day after Mr Sampaio said he would dissolve parliament, but recovered.