17 MAR 2011
Portugal saw its credit ranking downgraded by two notches yesterday (16 March), after the country's Prime Minister José Sócrates warned earlier this week that if his cabinet were to fall over proposed austerity measures, the country would have to seek a bailout from the EU.
Sócrates said his minority government would be unable to continue if the country's long-term economic strategy, which includes the latest austerity measures, were not passed in parliament (see 'Background'). This, according to the Portuguese media, would result in the fall of the cabinet.
Portugal's plight has become yet more complicated by the fact that the main opposition Social Democrats (European People's Party-affiliated) have refused to back the government's latest austerity plans, which aim to ensure that the country meets its budget goals.
Sócrates has long resisted growing investor and peer pressure to request an international bailout to ease its debt crisis, at least on the terms that were imposed on Greece and Ireland. He hopes an austerity drive will convince markets the country can solve its problems on its own, helping to push borrowing costs lower from euro lifetime highs.
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