A tearful Mr Baillieu announced that Major Projects Minister Denis Napthine would replace him after a day of turmoil caused by the shock decision of backbencher Geoff Shaw to quit the parliamentary party and move to the cross benches.
That decision means that the Coalition government could be ousted from office unless it can win Mr Shaw's support on key legislation, including the budget and any possible vote of no confidence.
Mr Baillieu said he had to go for the good of the party and that he would remain in parliament, killing Labor hopes of another by-election.
Dr Napthine is a former state Liberal leader who was ousted in a coup in 2002 before being given the chance to contest an election.
Mr Baillieu offered Dr Napthine, a factional ally, his full support.
"I will be staying on in parliament to support him," Mr Baillieu said. "He has my full support. He's an outstanding individual."
Ashen-faced senior ministers Louise Asher and David Davis left the party-room meeting with Mr Baillieu, who read from a statement and did not take questions.
Mr Baillieu resigned following a crisis meeting of Liberal MPs at parliament this evening called after MP Geoff Shaw quit the party, threatening the coalition's grip on power.
Mr Baillieu said a leadership change was in the best interests of the government.
"I love this state, I love the Liberal Party and I love this role that I have had the honour to enjoy over the last two and a bit years," Baillieu said.
"It is apparent to me that a change of leadership is in the best interests of the government."
Dr Napthine refused to explain why Mr Baillieu stood down.
"The explanation is that Mr Baillieu made a decision to step down as leader of the Liberal Party," he said.
"Mr Baillieu made his own decision to stand down.
"I will lead the party to the next election.
"Ted has put his heart and soul into the Victorian Liberal Party... for the best part of three decades," Dr Napthine added.
"He is not just a colleague, he is a great friend."
Dr Napthine, who turnd 61 today, said he had been proud to serve under the Baillieu government, which came to power at the state election in 2010.
"I look forward to providing strong, stable and positive government for the people of Victoria," he said.
Earlier today Mr Baillieu had declared he was "confident" the Coalition will continue to govern in Victoria, despite the shock resignation Mr Shaw threatening his hold on power.
Mr Shaw's decision to quit the Liberal Party and sit as an independent has plunged Mr Baillieu's government further into crisis, following growing pressure on his leadership.
Mr Shaw's resignation leaves the Liberal-National coalition with 44 seats in the 88-seat lower house and Labor 43, assuming it retains the safe seat of Lyndhurst at a by-election next month.
Mr Baillieu said the controversial former Liberal, who would sit on the crossbenches, gave the government a short resignation letter this morning but did not provide detailed reasons for his decision.
His resignation means the coalition will likely have to rely on his vote to get laws through the parliament.
Asked if Mr Shaw would support the government, Mr Baillieu said: “I understand he will be considering his position.”
Despite the uncertainty surrounding his government, Mr Baillieu emerged from a meeting of Liberal and National MPs today to declare his party would govern “decisively” and push its “strong agenda”.
“I am confident we will continue to govern,” he told reporters as he entered question time.
Opposition Leader Daniel Andrews said he would not actively pursue Mr Shaw's vote.
“How Mr Shaw votes is up to him,” Mr Andrews said.
“I don't think Mr Shaw will be offering his vote to anyone. I won't seek his vote and I will not seek to change the dynamic on the floor to seek his vote.
“That circus is run up in Canberra and I won't be doing it here.”
Mr Andrews said every Victorian was keen to see why Mr Shaw had effectively sacked Mr Baillieu and the Liberal Party.
“He is not so much running a government, he is running a complete and utter circus,” he said of Mr Baillieu.
“This government is doing nothing to deliver for the people of this state other than to lurch from one crisis to the next.”
Mr Shaw's resignation sparked a series of crisis talks in the parliament and heaped more pressure on the leadership of Mr Baillieu, following poor polling and the secret Liberal Party tapes issue.
Mr Shaw was expected later today to explain his resignation.
“Mr Shaw, the Member for Frankston, has resigned from the parliamentary Liberal Party,” the leader of the Liberal Party in the upper house, David Davis, told parliament.
Mr Davis, asked by the opposition whether the Baillieu government still existed, said matters of confidence would be dealt with in the lower house.
“I can state that the government is very much determined to press forward.”
Mr Davis said he was unaware of any undertaking by Mr Shaw to support the government, which until today controlled the lower house with a one-seat majority.
Mr Shaw failed to vote in the first division called following his resignation.
The government won the vote 43 to Labor's 42. Labor's numbers are currently down from 43 because of the decision of Labor's Tim Holding to quit politics, forcing a by-election in his seat of Lyndhurst on April 27.
Mr Baillieu said today's events would not change the party's decision not to run a candidate in the by-election.
Mr Andrews said a move to the cross benches would mean Mr Shaw has to OK everything the government wants to do.
“It would seem that very piece of legislation, everything this government wants to do, will now have to be the product of a negotiation with Geoff Shaw, and in that endeavour I wish Ted Baillieu luck. I think he'll need it,” Mr Andrews told Fairfax Radio.
Police late last year launched a criminal investigation into Mr Shaw after he was allegedly found to have rorted his taxpayer entitlements over the use of his parliamentary car.
In other controversies, Mr Shaw made lewd gestures at the opposition during a question time; likened legalising homosexuality to legalising child molestation, speed driving and murder; was involved in a roadside punch-up with a young motorist in 2011; was fined and put on a good behaviour bond after being charged over a 1992 assault at a Frankston nightclub; and allegedly called Labor MP James Merlino a “midget” in question time.
Earlier today, Mr Baillieu insisted his government was united, amid criticism from his own backbench and ongoing leadership speculation.
Liberal backbencher Bill Tilley said while he believed Mr Baillieu was listening, the government's leadership team needed to revamp the way it dealt with the backbench.
“It's a management thing,” Mr Tilley said.
“There should be some further and significant conversations: how to interact with the executive and the backbenchers to deliver the right, the proper and accurate messages to Victoria.”
Mr Tilley is annoyed with Mr Baillieu over comments he made about him in parliament yesterday.
Mr Baillieu told parliament Mr Tilley quit his role as parliamentary secretary to Police Minister Peter Ryan because his conduct was inconsistent with the role.
Mr Tilley said he was unhappy with the Premier's comments and wanted to speak with him today.
“There was some inaccuracies and I just want to correct those.
“They're taking some things from a report that was tabled by the Office of Police Integrity (OPI) and adding some things that certainly weren't part of that report.”
Mr Tilley resigned as parliamentary secretary after he was criticised by the OPI over a plot to oust former chief police commissioner Simon Overland.
Planning Minister Matthew Guy, who has publicly supported Mr Baillieu this week, is widely regarded as a potential future Liberal leader.
The Premier said he had no need to ask Mr Guy to pledge his support.
“Matthew and I get on very well. I know he's very supportive,” Mr Baillieu said.
The government has been thrown into turmoil this week with the airing of secretly-recorded telephone conversations reportedly involving Mr Baillieu's chief of staff Tony Nutt and a former adviser to Mr Ryan, Tristan Weston.
Mr Weston quit after the OPI found he was involved in a plot to undermine Mr Overland.
The secret recordings and receipts leaked to the Herald Sun reportedly show Mr Weston was paid $22,500 by the Liberal Party after leaving Mr Ryan's office.
Liberal state director Damien Mantach reportedly authorised the payment to Mr Weston.
Mr Baillieu said he did not believe any serious corruption had occurred despite referring the matter to the Independent Broad-Based Anti-Corruption Commission (IBAC).
theaustralian.com.au 6 Mar 2013
Ted Baillieu is involved in elaborate corruption involving Victoria's ex 'top dog' police chief Simon Overland together with others in drugs, prostitution and links to the criminal 'bikie' underworld.
The corporate media is (deliberately) slow in exposing the truth behind the multimillion dollar fraud and corruption in government.
Another win to the 'corporatocracy'.
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