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Crisis talks on Portugal bailout breakdown

The country’s three main parties failed to reach a deal to end the political crisis that threatens to derail the government’s bid to overhaul its finances.

Image: Francisco Seco/AP/PA

PORTUGAL’S THREE MAIN parties failed yesterday to reach a deal to end a political crisis shaking the country and threatening to derail the bailed-out government’s bid to overhaul its finances.

More than two weeks into a crisis sparked by the resignation of two key ministers amid ongoing feuding over austerity cuts, the leader of Portugal’s Socialist opposition blamed the two parties in the embattled centre-right coalition government for sinking talks aimed at sealing a pact to pursue radical reforms and avoid a second rescue.

Antonio Jose Seguro, the party’s secretary general, said the centre-right coalition had “made it impossible” for his Socialists to join them in a deal to ensure the country meets its commitments under its bailout, as urged by conservative President Anibal Cavaco Silva.

“Over the course of this week, we’ve fought for the government to put an end to its austerity policy,” said Seguro.

“What’s going to happen now? That’s for the president to decide,” he added.

He said Prime Minister Pedro Passos Coelho’s centre-right PSD party and its coalition partner, the conservative CDS-PP, had refused the Socialists’ proposals to ease off harsh austerity cuts in favour of spending aimed at boosting economic growth and reducing unemployment.


Portugal is struggling with a three-year recession and record unemployment of more than 18 percent as it implements the harsh cuts promised in return for its 78-billion-euro rescue from the European Union and International Monetary Fund.

Seguro said two irreconcilable positions had emerged during the negotiations, which started Sunday, and that he had insisted on “turning a corner in Portugal because the Portuguese people can’t take any more sacrifices.”

He pledged to keep fighting to renegotiate the austerity cuts agreed under the terms of the May 2011 bailout and for “a strong Portuguese position” on finding a solution to the eurozone debt crisis.

Cuts and tax increases

The current crisis erupted when two key ministers in the ruling coalition tendered their resignations amid disagreements over spending cuts and tax increases.

The political emergency destabilised the ruling coalition and stoked fears that Portugal would veer into a new crisis, shaking world markets fearful of a new wave of instability in the eurozone’s debt-laden periphery.

Portugal’s doggedness in implementing reforms has won it praise from its creditors, and it has been hoping to exit the rescue programme in 2014.

But the political uncertainty has pushed up the country’s borrowing rate, raising the spectre of another bailout.

Portugal’s austerity measures are widely blamed for exacerbating the country’s recession, and the resulting hardship has sparked growing street protests.

The country forecasts a 2.3-percent economic contraction this year.

- © AFP 2013.

Related: Portugal’s PM declares: ‘I’m not resigning. I’m not abandoning the country’>
Read: Eurozone ministers to decide if Greece should get bailout money>

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