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3/24/11

Portugal's government collapses: The next domino

This week’s defeat of the minority Socialist government led by José Sócrates in a parliamentary vote on austerity measures—the fourth package in 12 months—triggered his prompt resignation as prime minister. But it also created a political vacuum in which nobody may have enough authority to negotiate any bail-out.

Few doubt that Portugal is close to the moment when it has no alternative but to seek help from the European Financial Stability Facility (EFSF), the euro zone’s bail-out fund. But economists say the crisis increases the chances that Portugal will need European Union funds within days. The finance minister, Fernando Teixera dos Santos, said that a failure to pass the austerity measures would create “additional difficulties…which I doubt we will be able to bear on our own.”

Announcing his resignation, Mr Sócrates predicted that an IMF/EU bail-out would result in even harsher measures than those that he had tried to push through parliament.

For more: Comments on Portugal's government collapses: The next domino | The Economist

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