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Portugal crisis given temporary reprieve

Monday, July 22, 2013 - 01:58

July 22 - Portugal's president soothes investor concerns by keeping the government in place until 2015. But as Joanne Nicholson reports tensions within the ruling coalition over tough austerity choices mean the country's political crisis has not been put to bed just yet.

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Portugal's politicians couldn't agree on measures to reassure investors the country won't default on the terms of its 78 billion euro bailout. But after weeks of political uncertainty, the country's president did soothe their nerves. (SOUNDBITE) (Portuguese) PORTUGAL PRESIDENT, CAVACO SILVA, SAYING: " As the national salvation compromise was not possible to achieve, I consider that the best alternative solution is for the present government to remain in its functions, with reinforced guarantees of cohesion and solidity of the coalition, until the end of its term (in 2015)" Portugal needs to reduce its budget deficit to 5.5 percent this year from last year's 6.4 percent and then to 4% in 2014. But the cuts have kept the country in recession and that's caused friction on the streets and in the coalition government. Several ministers have resigned. President Silva's assurances there won't be a snap election helped bring down borrowing costs. 10-year bonds fell below 7 percent. But tensions in the centre-right government haven't been resolved. David Buik from Panmure Gordon says the reprieve is short term. (SOUNDBITE) (English) DAVID BUIK, SAYING: "I believe the problem is as great as it ever was and I'd be absolutely amazed if you and I didn't have a conversation here in a couple of years time, saying the following banks, organisations, sovereign debt people have taken the following haircuts for these countries. They simply cannot service debt and make repayments on time so long as night follows day. Lisbon has asked the troika of lenders to delay its review of the country's finances until early September. But the President has warned the government must to stay together if Portugal is to return to the markets next year. Many fear that won't happen and a second bailout may be needed - with potentially damaging consequences for the rest of the euro zone.

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Portugal crisis given temporary reprieve

Monday, July 22, 2013 - 01:58