“I believe that our way forward is probably such that it will demand early elections,” Danilo Turk told journalists.

Slovenia was left with the prospect of a minority government, after a junior coalition ally, Pensioners’ party Desus, said on Tuesday it planned to quit the government over internal squabbles.

At a separate media conference Prime Minister Borut Pahor warned Slovenia may have problems similar to Portugal, which had to ask the EU for a bailout, if citizens reject pension reform raising retirement age to 65 from 57 for women and 58 for men.

“What saved Spain as opposed to Portugal? That was the pension reform,” said Pahor, urging Slovenians to vote in favor of the reform in spite of the government’s unpopularity.

He said his government would hold on at least until the referendum although he did not reject early elections. The next regular election is due in autumn 2012.

The government crisis pushed the blue-chip SBI index to an all-time low and analysts see prices falling further. The index lost 3.7 percent to close at 759.31 points.

Slovenia’s pension reform was passed by parliament in December but trade unions demanded a referendum on the issue, claiming the increase of the retirement age was too steep.

Opinion polls show that the reform would probably be rejected at the referendum after the government lost a referendum on labor reform earlier in April and a referendum on a new media law in December.

Government ratings have fallen to an all-time low over the last few months amid rising unemployment, slow economic recovery and lack of efficient reforms.

Export-dependant Slovenia was badly hit by the global crisis and its economy shrank by 8.1 percent in 2009. The government expects 2.2 percent growth this year versus 1.2 percent in 2010. (Reporting by Marja Novak; Editing by Michel Rose)