By Frances Harrison BBC correspondent in Colombo

The Sri Lankan government is considering the option of fresh elections if it cannot push through changes aimed at diminishing the President's powers.

A spokesman for the Sri Lankan cabinet, GL Peiris said nothing had yet been decided but warned that parliament still controlled public finances which gave it considerable leverage.

It is believed Sri Lanka's ten month old cohabitation government is entering a new phase of crisis.

There has been a flurry of indirect warnings, with state controlled radio and television talking about the need for new elections and ministers then denying it.

Now the cabinet spokesman GL Peiris says it may be necessary to make a direct appeal to the people.

Amendment

This has been triggered by the Supreme Court ruling on the proposed 19th amendment to the constitution, which seeks to diminish the President's powers to dissolve parliament.

GL Peiris gave warning on finances

The ruling will not be officially known until Tuesday but leaks to the local press suggest the verdict goes against the Prime Minister; ruling out a vital clause that would allow MPs to vote against their party and insisting on a referendum.

GL Peiris told journalists the government would not hold a referendum, instead preferring fresh polls.

But even that may be problematic.

According to Sri Lanka's constitution only the President can dissolve parliament and even she cannot do that until December 5th; one year after the last polls.

Veiled threat

In that context, GL Peiris warned that parliament still had a powerful lever, as controller of public finances and added that the government was currently preparing a new budget.

This has been widely interpreted as a veiled threat to cut off the president's funding if she does not cooperate, though Mr Peiris denied this was what he meant.

Nobody on either side of the political divide wants fresh elections so soon after the last ones, as political parties are thought to be short of funds for campaigning after three polls in as many years.

It looks as if the government is involved in a game of political brinkmanship; making indirect threats and raising the stakes by talking of fresh elections in the hope it will prevent the President from trying to undermine the stability of the existing government.