Portugal's centre-right coalition government ousted

The country's four left-leaning parties are expected to bring down the minority center-right government of Prime Minister Pedro Passos Coelho with a vote of no-confidence on Tuesday, newspaper Diário de Notícias reports.

Left wing parties ousted Portugal's ruling centre right on Tuesday, in the first such move against an elected government since the end of dictatorship in 1974, paving the way for a Socialist led administration to end years of austerity.

Any new elections could not take place until June at the earliest, as the current Parliament cannot be dissolved for six months. Passos Coelho's centre-right coalition won the most votes at the October 4 elections, picking up 36.9 per cent of the vote, but lost its parliamentary majority to an array of leftist parties.

The Socialist Party (PS) fell short of winning the election with an overall majority, although PS did build on the share of the vote it received in 2011.

The Socialists, pushed by their hard-left allies, want to roll back austerity policies of the past few years.

Regarding the PS and its ability to lead the country and how far it will distance itself from austerity policies, Costa, whose Marxist BE party is to the left of the PS, said, "The Socialist Party has to make big decisions and it has a large history of wrong decisions (on European Union austerity measures)".

The leftist alliance has pledged to spend more on the national health service and reverse cuts in pay, pensions and public services, as well as tax increases.

 Germany has previously expressed concern about the possibility of a swing from Mr. Passos Coelho's fiscally conservative government, which worked closely with global lenders during Portugal's debt crisis and bailout, to an alliance of anti-austerity parties.

Portugal's President Anibal Cavaco Silva must decide either to ask the Socialists to form a new government, or to allow the incumbents to stay in charge until new elections are held. A new government may be more than a week away, making it nearly certain that the 2016 state budget - a spending plan crucial to keep the country's finances in order - won't be ready by January 1.

The president said: "Until the moment of the appointment of the Prime Minister, no stable, coherent or credible alternative solution for a government was presented by the other political forces".

The divisions inside parliament were reflected in the streets outside, where about 5,000 left-wingers rallying in favour of a new Socialist-led government faced off with about 2,000 supporters of the conservative government. Political uncertainty is likely to continue to weigh on Portugal's funding costs, despite the very accommodative monetary policy of the European Central Bank (Portuguese debt is part of ECB's PSPP programme) and the more benign macroeconomic conditions in Portugal and the euro area.

What had happened in the stock market and to government bond yields had little to do with the PS programme but rather reflected "the fragility of Portugal's financial system", which Mr Passos Coelho had "failed to resolve", he said.