Austria faces snap September elections after government collapse

Snap elections are now expected in September and Mr Gusenbauer has said he will not try for re-election, instead recommending acting party chairman Werner Faymann for the position.

The difficulties in the coalition, which has often suffered strained relations, came to a head over the weekend when both parties failed to agree health reforms.

In addition, last month, the Social Democrats infuriated the People's Party by appearing to undermine the coalition's consensus on European policy.

In an open letter to the Kronen Zeitung - a eurosceptic tabloid - Mr Gusenbauer said that in the future there should be referendums on European treaties, including the Lisbon Treaty if it is substantially altered following the Irish rejection of it in June.

Both parties have lost power while in coalition but the Social Democrats are doing worse in the polls than their conservative rivals.

Their flagging popularity could benefit the far-right anti-immigration party, the Freedom Party, which could be a potential partner in the next government. But both main parties have shown little appetite for such a coalition.