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Portugal worries ease for now

Friday, July 05, 2013 - 01:48

July 5 - Portugal's prime minister says he's found a way to maintain government stability following the resignations of the finance minister and foreign minister, in the most damaging political rift since the country received a bailout in 2011. Joanna Partridge reports.

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After a tumultuous week for Portugal - some positive news. Prime Minister Pedro Passos Coelho says he's found a way to maintain a stable government with the junior partner in the ruling coalition. It comes after the resignations of both the foreign and finance ministers sparked fears the political crisis could upset Lisbon's economic progress, and its hopes of exiting its EU/IMF bailout programme. SOUNDBITE: Pedro Passos Coelho, Portuguese Prime Minister, saying (Portuguese): "I will do everything to guarantee the necessary solutions to let the government continue to carry out its work to fullfill our economic and financial programme. The programme guarantees Portugal's return to markets even with support, as we all hope that all sacrifices and efforts of the Portuguese people will be rewarded by the consistent and solid results that we are achieving." The deal still needs to be firmed up and approved by the President. He's due to meet the heads of the political parties on Monday and Tuesday. The country is going through its biggest economic slump since the 1970s. But its attempts to resolve the crisis seem to have reassured investors. 10-year bond yields topped 8% earlier this week, but fell to just over 7% on Friday. Other euro zone members have been watching developments in Portugal closely. German Finance Minister Wolfgang Schaeuble. SOUNDBITE: Wolfgang Schaeuble, German Finance Minister, saying (German): "I think the euro is seen as so stable by financial markets that even political situations in individual countries, which always occur in democracies, don't mean a crisis for the euro." Lisbon doesn't believe the week's wobbles have thrown it off course, and still hopes to return to slight growth next year. But analysts warn Portugal may find it harder to commit to more spending cuts, and its banks may have to borrow more money from the ECB, if access to international markets dries up.

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Portugal worries ease for now

Friday, July 05, 2013 - 01:48