Portuguese bonds rally as president rejects calls for elections

Portuguese president Anibal Cavaco Silva has voiced support for the country’s centre-right coalition government and ruled out snap elections to resolve a political crisis shaking the bailed-out nation.

The president urged the two parties in the ruling coalition – prime minister Pedro Passos Coelho’s centre-right PSD and the conservative CDS-PP – to work together to see through the reforms agreed under Portugal’s 2011 bailout deal and enable the country to return to the international financial markets.

“I think in the current context of national emergency, calling elections is not a solution for the problems Portugal is facing,” Cavaco Silva has said.

“I think the best solution is to keep the current government in power.”

His remarks came after crisis talks between Portugal’s three main parties failed to reach a pact on pursuing radical reforms to avoid a second international bailout, as Cavaco Silva had called for, earlier last week.

“It is important to show our European partners that Portugal is a governable country,” Cavaco Silva said.

“The government has an undeniable majority.”

The coalition between the two ruling parties gives the government a comfortable majority in parliament, but the alliance is at risk after the resignation early this month of finance minister Vitor Gaspar, the architect of the budget cuts, and foreign minister Paulo Portas, the CDS-PP leader and an increasingly sharp critic of austerity.

As reported by The Guardian, Mujtaba Rahman, Europe director at Eurasia Group, said that the Portuguese government is unlikely to last until 2015.

Rahman has also warned that Portugal’s chances of exiting its bailout next year are receding.

As Rahman explained, the country’s situation will get clearer this autumn, when Portugal’s lenders return to assess the situation:

“As a result of the political impasse over the course of the last month, the eighth Troika review will now most likely take place alongside the ninth review, at some point in late September/early October,” Rahman has reportedly said.

 

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