Portugal president seen calling snap election

LISBON, March 31 (Reuters) - Portugal's president is expected to decide on Thursday when to hold a snap election following the resignation of the prime minister, kicking off a campaign focussed on a debt crisis that could lead to a bailout.

The president has called a meeting of the council of state -- an advisory body made up of senior political figures -- to decide the next steps in the crisis, which has sent Portuguese bond yields to successive new euro life time highs this week.

The council will meet at 1400 GMT, after which President Anibal Cavaco Silva should decide when to hold the election as all opposition parties and the ruling Socialists have urged him to do.

The parties rejected the idea of a coalition cabinet to avoid an election, and have also ruled out pre-election alliances, highlighting a dramatic increase in polarization and antagonism among the parties. [ID:nLDE72O0Q7]

They urged the president to call the snap election as soon as possible. According to Portugal's electoral law, elections can be held at the earliest at the end of May.

The crisis caused by the resignation of Prime Minister Jose Socrates last week after parliament rejected an austerity plan has deepened Portugal's economic woes, prompting downgrades by rating agencies which said a bailout is now more likely.

However, the short-term outlook is clouded by the fact that Socrates' government will almost certainly remain in a caretaker capacity until the election, undermining Lisbon's ability to seek a bailout even if financing conditions become acute.

Economists have focussed on two large Portuguese bond redemptions in coming months. Most of them say the country has raised enough funds this so far this year to be able to repay around 4 billion euros ($5.63 billion) in April.

But others say the country still needs to raise funds in the market to repay nearly 5 billion euros in June, which may prove prohibitively expensive or unattractive to investors.

Socrates insists the country can do without a bailout, but the leader of the main opposition Social Democrats told Reuters that his party, which leads in opinion polls, would consider supporting a request for a bridging loan if the financial crisis escalates. [ID:nLDE72P0BM]

(Reporting by Axel Bugge and Shrikesh Laxmidas; Editing by Elizabeth Fullerton)