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Portugal and Ireland inch closer to financial disaster
Date 28/10/2010 11:58  Author webmaster  Hits 1066  Language Global
28 OCT 2010

By Valentina Pop

EUOBSERVER / BRUSSELS – Some of the weakest members of the eurozone are seeing their financial problems deepen, with Portugal failing to push through an austerity budget and Ireland saying it has to make further cuts.

Portugal's minority government on Wednesday (27 October) failed to reach agreement on the budget, with the main opposition party, the centre-right Social Democrats (PSD) formerly led by European Commission President Jose Manuel Barroso, walking out of talks.

Markets reacted nervously - the yield spread between Portuguese 10-year bonds and similar German bonds widened to 3.287 percent from 3.175 percent the day before.

The Portuguese finance minister warned that if the budget is not passed: "the country will find itself in a serious situation with grave economic effects."

The highly-endebted country is trying to avoid a Greek-type EU and IMF bail-out. But Prime Minister Jose Socrates needs the opposition PSD to go along with his September austerity package. If parliament does not pass the measures by the end of next month, Mr Socrates may even resign.

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