Portugal PM forced to quit

PORTUGUESE Prime Minister Jose Socrates resigned yesterday after his latest austerity budget was thrown out by parliament.

The defeat leaves Portugal teetering on the bring of an EU?bailout, without a government and without a credible plan to address its debt problems. Socrates had threatened to resign if the cuts – the fourth package of reforms designed to help the country avoid a rescue – were rejected.

But all five opposition parties voted against the measures and the primary opposition Social Democrat party called for an election.

“This political crisis has very grave consequences for the confidence Portugal needs from institutions and the financial markets,” Socrates said.

He presented his resignation two hours after the vote to President Anibal Cavaco da Silva, who said he would meet all political parties on Friday but the government would continue to hold authority until then.

Socrates said he would remain in power in a caretaker capacity but the country faces weeks of political uncertainty until an election can be held in two months’ time.

The yield on Portuguese government bonds shot to euro lifetime highs of 8.18 per cent preceeding the vote, a level the market views as unsustainable and that makes a bailout almost inevitable.

The collapse of the government leaves Portugal without permanent leadership for a crucial two-day summit starting today in Brussels, where the EU?will hammer out a solution to the bloc’s debt problems.