LISBON, July 21 (Reuters) - Portugal's President Anibal Cavaco Silva on Sunday ruled out a snap election and said he wanted the centre-right coalition government to stay in place to end a weeks-old political crisis and keep an international bailout on track.
The crisis has threatened to derail Lisbon's planned exit from the EU/IMF bailout, especially after talks on a broader political deal between the two coalition parties and the opposition Socialists collapsed on Friday.
'As the national salvation compromise was impossible to achieve, I consider that the best alternative solution is for the present government to remain in its functions, with reinforced guarantees of cohesion and solidity of the coalition, until the end of its term (in 2015),' the president said.
In a televised address, he said the coalition, which has overcome an internal rift that triggered the crisis in early July, had presented him 'guarantees of a solid understanding' on how to successfully complete the bailout programme and allow Portugal to return to full market financing.
He did not refer in his speech to a cabinet reshuffle that had been proposed by Prime Minister Pedro Passos Coelho to resolve the rift in the coalition.
'I think it's a positive decision to calm down investors that removes uncertainty and maintains the drive of meeting the bailout goals,' said Rui Barbara, an economist at Banco Carregosa.
'In the eyes of investors, Portugal should return to the situation before the political crisis.'
The government has a solid majority in parliament and last week easily defeated a no-confidence motion.
The main ruling Social Democrats (PSD) has said the government will press on with meeting fiscal goals for Lisbon to exit the rescue programme by mid-2014 as planned.
The austerity measures pursued under the bailout has stoked the worst recession in Portugal since the 1970s.
(Reporting By Andrei Khalip and Sergio Goncalves, editing by Shrikesh Laxmidas and Gareth Jones) Keywords: PORTUGAL CRISIS/PRESIDENT
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