Austria's governing coalition collapsed today and a snap election looked set for September after conservatives declared they could no longer work with the Social Democrats of Chancellor Alfred Gusenbauer.

Accused of poor leadership and unpopular within his own ranks, Mr Gusenbauer said he would not seek re-election as chancellor and recommended acting party chairman Werner Faymann for the job, a shuffle expected to be approved.

Dr Gusenbauer was stripped of his party leadership position last month after a series of regional election setbacks.

The conservative People's Party demanded an early election for the sake of "clarity" in government.

"Enough is enough. Good work in this government is no longer possible," party chief Wilhelm Molterer, who is also vice chancellor and finance minister, told a news conference.

"The Social Democrats are without orientation or leadership. We can't let the Social Democratic crisis become an Austrian crisis."

Should the conservatives win the next election, as polls now suggest, Austria could resume privatisations of state-owned firms including Telekom Austria and Austrian Airlines. Shares in both companies firmed today.

A conservative-led government is also likely to continue pension and tax reforms it started during its previous reign.