Cynthia Banham in Paris and Phillip Coorey on Bantam Island – The Prime Minister says he welcomes the resignation of the East Timorese Prime Minister, Mari Alkatiri, if it meant an end to instability in that country.

"It seems to me to be part of the process of working out the difficulties, resolving the impasse, breaking the logjam," John Howard said. "To that extent I am pleased."

However, he studiously avoided being seen to publicly interfere in East Timor's affairs, saying that although he wanted the issue of who governs the country to be resolved as soon as possible, he had no view on who should succeed Mr Alkatiri.

"It's not for me to nominate the prime minister of that country," he said. "It's for me... to encourage people in East Timor in a position of leadership all to resolve their differences and get on with governing their country."

The Foreign Minister, Alexander Downer, also welcomed the steps being taken by the East Timorese to resolve their "tumultuous" political problems.

"It's good to see that the East Timorese are now working through their political problems and are not just lying back and expecting us to provide appropriate security for East Timor without the East Timorese themselves addressing their fundamental problems that have caused the insecurity in the country," Mr Downer said.

Mr Downer was speaking in Paris before the opening of the France-Oceania summit, which East Timor's Foreign Minister, Jose Ramos Horta, had been due to attend. Mr Ramos Horta cancelled his attendance at the meeting on Friday, and resigned from the East Timorese Government on Sunday.

Mr Downer said Mr Ramos Horta had told him on Sunday that he would offer himself as a minister in a reformed government should Mr Alkatiri resign.

The Australian Government would encourage any new prime minister to address key issues "including negotiations with the people who were sacked from the East Timor defence force and negotiations with people from the defence force who have gone out and supported those people", Mr Downer said.

"If there is to be a new prime minister, that prime minister will have an enormous challenge to get the country onto a stable footing," he said.

It was likely that East Timor's President, Xanana Gusmao, a figure who had enormous popular support, would stay on following Mr Alkatiri's resignation, Mr Downer said.

Mr Howard said his warning on Sunday that Australian police and soldiers would not remain in East Timor indefinitely was not aimed at forcing Mr Alkatiri's resignation. "We are entitled to express an opinion about how long our troops stay in East Timor," he said.