Hungarian Prime Minister Ferenc Gyurcsany is expected to announce a cabinet reshuffle on Monday after the junior coalition party voted to quit the government, dpa reported.
The Alliance of Free Democrats (SZDSZ) decision to quit came when the senior Hungarian Socialist Party backtracked on further economic reforms aimed at cutting the nation's budget deficit and eventually adopting the euro.
Gyurcsany abandoned the reforms after losing a referendum on healthcare charges and tuition fees, a defeat that was the last straw for a party struggling with appalling popularity ratings.
The SZDSZ's departure leaves the crucial economy and health ministries leaderless and Gyurcsany is expected to appoint Gordon Bajnai, currently in charge of handing out European Union funding, to the head of the economy ministry.
Gyurcsany is also expected to shake things up at the environment, local government and labour ministries and create at least one new ministry.
The premier, speaking on television Sunday night, said that the reshuffle would be aimed at putting a focus on economic development.
While the reforms cut the budget deficit from a massive 9.2 per cent of Gross Domestic Product (GDP) in 2006 to 5.5 per cent in 2007, they also forced up inflation and slashed growth.
The government has now said that it wants to focus on promoting economic growth, although its estimates for recovery are proving more optimistic than those in other quarters.
With Gyurcsany's party now struggling with poll ratings in the low teens, analysts say that the reform process is now over despite Gyurcsany's promises to stick to plans to bring the deficit down to 3.2 per cent by 2009.
The fact that the Socialists, forced to govern without a majority after the coalition collapse, will be unable to push legislation through will also handicap them, analysts say.