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Debt-hit Portugal to hold election

Portugal's political parties have opted to hold an early election rather than form a new government, even though that could hasten the debt-stressed nation's financial woes and force it to take a bailout.

The Socialist government quit earlier this week in a dispute with rivals over new austerity measures.

President Anibal Cavaco Silva, who is largely a figurehead but oversees election procedures, met with all the country's political parties to see if they would voluntarily form a coalition government. But all backed a new election instead, which would take place in late May or early June.

Portugal, one of western Europe's poorest countries, is being engulfed by a financial crisis that is pushing it toward a bailout it does not want.

A decade of anaemic growth during which Portugal ran up high debts has sent its borrowing costs to unsustainably high levels. Although Europe's bailout fund is able to come up with the 75 billion euro that analysts estimate Portugal may need, its problems have contributed to investor fears about the entire 17-nation eurozone's financial soundness.

The parties' decision means that the bailout request to the European Union and the International Monetary Fund will be deferred until early summer, after the election.

"Portugal doesn't need any help," outgoing Socialist Prime Minister Jose Socrates said, insisting that his own policy of tax hikes and pay cuts would reduce the country's high debt burden and restore investor faith.

"I know what (a bailout) would mean. I know what it meant for the Greeks and the Irish and I don't want that for my country," he said at a European summit in Brussels.

Socrates says his latest austerity plan - which opposition parties rejected - would drive the deficit down to 4.6% this year. The opposition Social Democratic Party agrees on the need for deficit-cutting measures but said the government's latest package went too far.

Even without assistance, austerity measures are likely to remain in place for years, choking one of the eurozone's smallest and feeblest economies and deepening public anger. A 24-hour train strike shut down the national rail network - the latest action by disgruntled public employees.


From Belfast Telegraph