Portugal’s crisis worsens as yields move above 8%
Portugal’s financial and political crisis worsened as yields on the country’s benchmark 10-year bonds moved above 8% for the first time since November.
As a result, several key politicians have announced their resignation, triggering chaos and uncertainty in the political arena.
Earlier this week, Finance Minister Vitor Gaspar resigned, followed by Foreign Minister Paulo Portas, who heads the Popular Party – the junior partner in the coalition government, amid disagreements over the country’s path.
Prime Minister Pedro Passos Coelho has said that he will stay in office and that he has no intention of “abandoning” the country.
However, it is not clear whether the Popular Party will continue to support him.
Meanwhile, demonstrators have taken to the streets to protest against planned austerity reforms.
Portugal has been in recession for two years and the economy is expected to contract by 2.3% by the end of 2013.
According to Stephen King, HSBC’s chief economist, the crisis in Portugal reveals that the eurozone’s problems are fundamentally political.
“The € crisis was always a crisis of politics more than economics or finance. ECB can paper over the cracks but cannot repair the foundations,” he commented on Twitter.