Brussels, 03/07/2013 (Agence Europe) - The political crisis in Portugal is generating uncertainty about continuation of the structural adjustment programme that the country has been implementing in return for financial aid.
On Tuesday, the day after the resignation of the country's finance minister Vitor Gaspar, it was the turn of the foreign minister, Paulo Portas, to announce that he was leaving the government due to disagreements with the choice of Maria Luis Albuquerque to replace Gaspar as finance minister. The prime minister, Passos Coelho, refused to accept the second resignation because it jeopardised the very existence of the coalition running the country. The holding of new general elections (demanded by the Socialist opposition) is being discussed.
On Wednesday, Portugal's ten-year yield shot up to 8% for the first time since November 2012. The president of the European Commission, José Manuel Durão Barroso, said: “The European Commission and I personally are following the political crisis in Portugal with very serious concern. The initial reaction of the markets shows the obvious risk that the financial credibility recently built up by Portugal could be jeopardised by the current political instability. If this happens it would be especially damaging for the Portuguese people, particularly as there were already preliminary signs of economic recovery”. Barroso, a former prime minister of Portugal, added: “This delicate situation requires a great sense of responsibility from all political forces and leaders. The political situation should be clarified as soon as possible. We trust that Portuguese democracy will deliver a solution ensuring that the sacrifices the Portuguese people have made until now will not have been in vain”.
At this stage, the Commission refuses to make any connection between the convening of early elections and a freezing of loans by the country's lenders. A European source said that, if there were elections, it would be difficult to carry out the next fact-finding mission, but if the government remains in place, then the mission could take place. The troika of lenders (European Commission, European Central Bank and International Monetary Fund) is due to travel to Lisbon in mid-July. The situation in Portugal will be discussed at the Eurogroup meeting on Monday 8 July. (SP/MB/transl.fl)