Portugal Rejects Budget: Government Collapses, Prime Minister Resigns. Europe Gasps Simultaneously..

Portuguese Premier Resigns After Austerity Is Rejected. 

Portuguese Prime Minister Jose Socrates submitted his resignation Wednesday after parliament rejected his minority Socialist government's latest austerity measures.

The rejection "had taken away from the government all conditions to govern," Socrates said in a televised statement. He said his government would remain in power in a caretaker capacity.

The parliament's rejection of austerity measures—as well as Socrates' resignation—comes just a day before a European summit.

Socrates has said rejection of the austerity plan would force the debt-laden country to follow Greece and Ireland and seek an international bailout, which he opposes.

Brendan Keenan: Kenny will have to pull new plan out of bag as chaos descends  From The Independent.ie..

ENDA Kenny packed his bags for one EU summit in Brussels, but it looks as though he will be attending a very different one.


As the old political saying has it, events have taken over. The plans of EU leaders have been thrown into disarray by even more bad news from Ireland's banks; the imminent collapse of Portugal's government; and stern resistance to bigger bailouts from those flinty Finns.

Mr Kenny's stated purpose at the meeting -- to secure a reduction in the interest rate on the €80bn EU/IMF rescue fund -- now looks irrelevant. Instead, according to reports in Brussels, there may be a special summit as early as next week just to deal with Ireland's difficulties.

The reason seems to be that new estimates for losses at the Irish banks are going to be worse than even the €35bn allowed for in the EU-IMF loan package could cover. These "stress test" figures are not due until next week, but it may be that they will render the original plan unworkable.

EU leaders to delay eurozone rescue deal  From Euractiv.com.  Excerpts:

A government collapse in Portugal and political tensions in other member states means EU leaders are set to postpone until June a decision to reform the euro zone and boost the bloc's bailout facility as they meet for a crucial economic summit in Brussels today and tomorrow (24-25 March).

Today's summit has long been sold as a deadline for leaders to sign off on a swathe of economic reforms including boosting guarantees for its temporary bailout fund, the European Financial Stability Facility (EFSF), which has already been used for Greece and Ireland.

It was also branded as the summit that will finalise a permanent rescue fund after 2013 - the European Stability Mechanism.

But in light of recent political developments in Portugal, Finland and Germany, both of these goals have been put in jeopardy, EU diplomats say.
And:
Adding to the euro zone's woes, Germany put the brakes on a deal for the ESM on Wednesday as it revealed it could not foot payments it had committed to make in 2013. And Finland said it would resist raising the EFSF's ceiling before elections scheduled on 17 April.

"Those providing the guarantees cannot, and those who may soon need a bailout may not be able to request one," an EU diplomat said yesterday, alluding to Finnish resistance to the EFSF and a political meltdown in Portugal preventing it from requesting a bailout.

There will be many more headlines regarding Europe's economy--soon.

Meanwhile In European Financial Crisis News..

Protests continue in Croatia   From World Socialist Web Site.  Excerpts: 

Since late February, continual protests involving thousands of people have been waged in many cities and towns throughout Croatia. Young people, in particular, are demanding the resignation of the right-wing government led by Prime Minister Jadranka Kosor. Workers and farmers are protesting against low wages, horrific working conditions and the precarious situation in the former Yugoslav autonomous republic.

Underlying the protests is the deteriorating social situation. Croatia was hit hard by the financial crisis, which the Kosor government met with a brutal austerity programme involving a drastic reduction in wages and benefits. The economy shrank by 1.4 percent in 2010, and the unemployment rate reached 19.6 percent. The unions say the wages of 70,000 employees are not being paid.

Demonstrations were held in several Croatian cities on Saturday, March 5. About 1,500 participants assembled in the northern Croatian town of Varazdin, according to the Hina news agency. The co-organiser of the protest, Denis Mladenovic, said, “We do not want a state in which the workers work without getting paid, in which they end up on the street after working for their firm for 20 years, and in which young people are left with no perspective.”

Lisbon bail-out talk agitates eurozone debt  From Financial Times.  Excerpts:

A vote on the Portuguese minority government’s austerity package is expected on Wednesday. The main opposition says it won’t back the measures and this could lead to prime minister José Sócrates’s resignation.


Euro zone finance ministers have agreed the terms of a permanent EU rescue fund.

Euro zone finance ministers have agreed the terms of a permanent EU rescue fund which increases the effective lending capacity of the current arrangements.

In the wake of the Greek debt crisis, Europe produced a huge rescue mechanism designed to shore up the single currency and to convince the markets that the euro would be defended.

But almost one year on, the markets have not been reassured and the €750 billion fund has already been tapped by Ireland, with Portugal looking increasingly vulnerable.

Portugal faces deadlock over debt crisis  From Boston.com.  Excerpts:

Just as Portugal appeared to have dodged a bailout like those taken by Greece and Ireland, a domestic political spat yesterday was set to worsen its financial troubles and possibly spoil Europe’s efforts to put the sovereign debt crisis behind it.

Portugal’s main opposition parties told the beleaguered minority government they will not budge from their refusal to endorse a new set of austerity measures designed to ease a huge debt burden that is crippling the economy.

The new steps are likely to be rejected in a parliamentary vote expected tomorrow and the timing could not be worse. A defeat in the vote, Prime Minister José Sócrates warned, would trigger his government’s resignation, plunging Portugal into at least two months of political limbo just as officials were hoping to boost investor confidence in the country’s future.