Portuguese President Jorge Sampaio has announced he is dissolving parliament and calling snap elections for 20 February next.
Prime minister Pedro Santana Lopes's and the ruling Social Democrat party are well behind the opposition Socialists.
Mr Santana took over as leader when the former prime minister, Jose Manuel Barroso Durao, was appointed President of the EU Commission last July.
The President said the credibility of Mr Santana’s government had been decisively undermined.
His five months in office had seen a minister's bitter resignation, slumping polls and allegations of government interference with the media.
Portugal’s recovery from recession appears to be losing steam, with GDP dropping 1.2% in the third quarter.
The Socialists, under a new leader, Jose Socrates, are considered to have a good chance of taking power in the February election, which will usher in Portugal's fourth government since late 2001.
The Socialists opposed Mr Barroso's support for the invasion of Iraq last year. They also criticised the austerity programme he had imposed to narrow a budget deficit that breached eurozone limits in 2001.
But the party's policy architect, former European justice commissioner Antonio Vitorino, has vowed the Socialists will keep a tight grip on spending.
