Portugal just may be on the brink of economic and political collapse. First the nation’s finance minister resigned. Then a day later, the minister who took over the country’s finances quit, saying he disagreed with the austerity measures the Portuguese prime minster was following.
Portuguese Foreign Minister Paulo Portas handed his resignation in today, which could signal trouble for the nation’s coalition government. Portas headed up the junior party in the government coalition, and he had been overseeing budget cuts after Finance Minister Vitor Gaspar quit on Monday.
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The BBC reports that Portas’ resignation letter indicated that he disagreed with the austerity path set forth by Portugal’s Prime Minister, Pedro Passos Coelho. The nation is trying to meet the terms of its 2011 bailout, and it has been in recession since then. Some have predicted that Portugal’s economy will contract by 2.3 percent this year.
After Gaspar resigned, Coelho appointed Treasury Secretary Maria Luis Albuquerque as his replacement, and many saw that move as an intent to push ahead with his planned austerity cuts. Portas’ resignation apparently came just minutes before Albuquerque was to be sworn in as the new finance minister, reports The Financial Times’ Peter Wise.
Portugal’s Coalition Government
At this point it’s too early to tell what will become of the coalition government in Portugal. Portas is the head of the CDS-PP right-wing party. If Portas’ part doesn’t back the prime minister’s party, then it loses its parliament majority. If the two-party government splits, then it could lead to an early general election.
Such a split has been viewed by some as one of the largest risks to the country’s completion of its bailout program. It also undermines Coelho’s authority and could mean that Portugal will continue to need outside support after its bailout. The country had been planning to finish its bailout program by June of next year.
BNP Paribas analyst Ricardo Santos told The Financial Times that Portugal may end up seeking a precautionary line of credit sooner than previously expected.