Passos Coelho sees Portugal president naming him PM, scuppers talks

LISBON (Reuters) - Portugal's caretaker prime minister Pedro Passos Coelho said he expects the president to give the go-ahead to his centre-right coalition to form a new government as talks broke off with the opposition Socialists, whom he accused of "political blackmail".

The move ups the ante and may lead to a government crisis since, though Passos Coelho's grouping won the most votes in an Oct. 4 election, it fell short of a parliamentary majority. A minority centre-right government would need support, or at least abstention, from the Socialists to pass laws in parliament.

The inconclusive election result prompted negotiations between the second-placed centre-left Socialists and two hard-left parties on forming a government, who altogether have a majority in parliament. The Socialists had also been negotiating with Passos Coelho's coalition, until Tuesday night.

"I'm not going to govern under a Socialist programme and I certainly won't expose the country to any kind of political blackmail where those who lost (the election) impose conditions on those who won," Passos Coelho told reporters.

"What is to be expected is that the president will call the (centre-right) coalition to form the government, that is obviously what I expect," Passos Coelho said.

He also said he did not intend to have further talks with the Socialists if it was only "to simulate negotiations".

The possibility of a leftist administration or a prolonged power vacuum has dialed up political uncertainty in a country that is still recovering from a debt crisis.

President Anibal Cavaco Silva must now decide which leader to name prime minister after consultations with the heads of all political parties with parliament representation, a process which should start at the end of this week.

Talks broke off on Tuesday night with Passos Coelho saying the two had made absolutely no progress. Earlier, Socialist leader Antonio Costa told Reuters his party was better placed to form a stable government than the centre-right coalition and promised that any such government will honour Lisbon's budget commitments.

"I've had two meetings with the Socialist Party and I do not intend to have another one just for show, just to simulate that we are looking to achieve a result ... because the Socialist Party has until now given no contribution for it to be achieved," Passos Coelho said.

If named prime minister, Passos Coelho would have to present his government programme to the opposition-dominated parliament. If this is rejected, the president would then have to pick a new prime minister nominee, possibly Costa - if he manages to secure a stable leftist majority by then.

Portuguese shares took a hit earlier this week from the growing uncertainty. On Wednesday investors bought stocks and Portuguese bonds shrugged off the unease.

(Reporting By Andrei Khalip; Editing by Axel Bugge and Mark Heinrich)

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