Portugal's acting PM fails to gain Socialist backing for government

LISBON- Portugal's acting prime minister failed on Friday to win the backing of opposition Socialist leader Antonio Costa for a new centre-right government, setting the scene for rising political uncertainty.

Pedro Passos Coelho had invited Costa to the three-hour meeting after his coalition won the most votes in an election but failed to win a majority in parliament, meaning it needs the support of the Socialists to pass legislation.

"This meeting (with Passos Coelho) was inconclusive because there was no proposal presented to us," Costa told journalists. "This (meeting) did not meet the expectations we had."

Analysts have warned that a protracted stalemate in forming a government could undermine a nascent economic recovery and reforms after years of cuts and tax hikes by the centre-right coalition under an international bailout.

Just an agreement by the Socialists to abstain from votes in parliament would be enough for Passos Coelho to get legislation passed and govern.

"We are open to all solutions," as long as the country sticks to European Union budget rules and brings the budget deficit to below 3 percent of gross domestic product (GDP), Passos Coelho said.

The two will meet again on Tuesday, they said.

But Costa indicated that he is keeping his options open, possibly trying to create a leftist government instead of supporting the centre-right, saying: "We need a change of politics and policies."

Costa met the Communists on Wednesday and will meet leaders from the Left Bloc on Monday.

"The meeting was very inconclusive, with the Communists it was easier," Costa said.

Costa wants to return more disposable income to families but has said that he respects European budget rules. His party gave him a mandate to talk both the left and the right after the election.