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Embattled Portuguese PM vows to stick to austerity path

Embattled Portuguese Prime Minister Pedro Passos Coelho vowed Monday to stick to reforms imposed by the bailed-out country’s international creditors, in a bid to restore confidence after a political crisis sparked by the unpopular austerity measures.

“The confidence acquired during the last two years has been a bit weakened,” the prime minister said.

But he promised to “rebuild this confidence by removing doubts on our willingness to finish our aid programme”.

In exchange for 78 billion euros ($103 billion) in rescue funds put up by the European Union and the International Monetary Fund, the country pledged to carry out sweeping reforms including massive job cuts in the civil service.

Portugal’s doggedness in implementing the reforms has won it praise from its international creditors, and it has been hoping to exit the rescue programme in 2014.

But the measures have proved deeply unpopular at home, and disagreements over the spending cuts and tax increases were at the heart of a political crisis that erupted in early July after two key ministers resigned.

On Sunday, the ruling coalition gained a reprieve as the president, who has the power to call snap elections, said he backed the government and ruled out early polls.

In reaction, investors eased pressure on Portugal, with yields on 10-year bonds falling to 6.537 percent in late morning trade from 6.799 percent at Friday’s close. The Lisbon stock market was also up 2.46 percent.

“There are many who say that the austerity is excessive, but it is what is required under the circumstances,” said Passos Coelho, pledging to push on with the deep reforms.