Portugal's government talks over EU/IMF bailout break down

Saturday 20 July 2013 20.20
The political crisis started as an internal rift in the ruling coalition and expanded to a debate over the bailout plan
The political crisis started as an internal rift in the ruling coalition and expanded to a debate over the bailout plan

Portugal's main political parties broke off talks last night on a "national salvation" pact to ensure an EU/IMF bailout stays on track, leaving it to the president to decide how to proceed.

Political turmoil has already forced Lisbon to request a delay in the eighth review of the bailout by its creditors.

The review was initially due to start last Monday, until the end of August or early September.

The €78bn bailout programme and attached austerity policies are associated with the worst recession in Portugal since the 1970s.

The leader of the main opposition Socialists, Antonio Jose Seguro, said the ruling coalition had rejected most of his party's proposals aimed to renegotiate the terms of the bailout.

The crisis started as an internal political rift in the ruling coalition and expanded to a debate over the bailout plan.

It has threatened to derail Portugal's planned exit from the bailout and full return to debt markets in mid-2014.

The Portuguese government says abandoning austerity would undermine Lisbon's credibility with lenders and investors.

Analysts say the situation is very uncertain but the president could still avoid an escalation of the crisis by keeping the ruling coalition in place rather than using his power to dissolve parliament and call a snap election.

The rift in the coalition broke out in early July with two senior ministerial resignations.

Keywords: portugal, talks