Lisbon in turmoil as second minister resigns
PORTUGAL'S government was rocked last night after Foreign Minister Paulo Portas, leader of the junior party in the fragile coalition, resigned in a burgeoning row over austerity policies in the recession-hit nation.
Mr Portas's departure came a day after the shock resignation of the finance minister, Vitor Gaspar, the architect of the country's reforms under its EU-IMF bailout two years ago, and has triggered calls for an early election.
The double resignation will increase market fears that the eurozone is entering a dangerous phase, with governments unable to deliver cuts and secure bailout funding.
Portugal's borrowing costs spiked sharply earlier in the day, with bond yields widening 22 basis points to 6.62pc.
The Greek government, which has been rebuilt after a row over cuts at the state broadcaster, was yesterday given three days to deliver firmer pledges on reforms before the troika of IMF, EU and ECB hands over the next tranche of its €240bn bailout.
Mr Gaspar cited political and budgetary tensions in his decision to quit and Mr Portas said he could not support the choice of the new finance minister.
Mr Portas's resignation led to fears that he could pull his Popular Party out of the coalition, which would leave Prime Minister Pedro Passos Coelho's Social Democratic Party without a parliamentary majority.
Such a rift could potentially derail the successful conclusion of Portugal's bailout programme, which is scheduled to end in 2014 and makes it more likely that Lisbon will need additional international aid.
Mr Coelho said last night that he would not step down and will not accept Mr Portas's resignation.
The uncertainty over the government's future comes amid growing public discontent within Portugal over its deficit-reducing programme, which is widely blamed for rising unemployment.
The prime minister's choice to replace Mr Gaspar with Maria Luis Albuquerque, the treasury secretary, was interpreted as a sign that the government would continue to press ahead with its reforms.
"The prime minister has chosen to maintain his path of mere continuity at the finance ministry," Mr Portas said in his resignation statement.
"I respect this choice but I disagree." (© Daily Telegraph, London)