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Portugal crisis-hit government faces confidence vote

Published on 18/07/2013

The Portuguese government was facing a no-confidence vote Thursday, as it struggles to end a political crisis that has threatened to derail the indebted country's bid to avoid a new bailout.

Prime Minister Pedro Passos Coelho’s centre-right coalition is expected to survive the vote as it has a comfortable majority in parliament.

But the Socialists’ backing of the motion put forward by the Greens raises questions, as they have been negotiating with the ruling parties to form a pact over the nation’s controversial 78-billion euro ($100 billion) bailout programme.

The Socialist party defended its move, saying it was in negotiations with the ruling parties, and not the government.

Reforms that Portugal has been forced to implement in exchange for the rescue funds have sparked public anger, and disagreements over spending cuts and tax increases were at the heart of the political crisis which erupted in early July after two key ministers resigned.

Portugal’s doggedness in implementing the reforms has won it praise from its creditors — the European Union and the International Monetary Fund. And it has been hoping to exit the rescue programme in 2014.

But the political uncertainty has pushed up the country’s borrowing rate, raising questions if Portugal would have to seek another bailout.

Last week, Conservative President Anibal Cavaco Silva called on two ruling parties — the centre-right PSD and conservative CDS-PP — as well as the Socialists to agree on a pact to pursue radical reforms so that the country can avoid a second rescue.

The financial rescue programme was negotiated by the Socialist Party when it was in power but has been implemented by the centre-right coalition, which won snap elections in June 2011.

The austerity measures are widely blamed for exacerbating Portugal’s three-year recession, and the resulting hardship has sparked growing street protests.

Portugal forecasts a 2.3-percent economic contraction this year and has a record unemployment rate of more than 18 percent.