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Portuguese PM to detail deal on averting coalition collapse

Portugal’s prime minister is due Saturday to finalise a deal aimed at averting the breakup of his coalition government, after the resignations of two key ministers plunged the country into a political crisis.

The shock resignations of finance minister Vitor Gaspar and foreign minister Paulo Portas had raised the spectre of a fresh wave of instability in the eurozone’s debt-laden periphery, where public anger was rising against painful reforms imposed by international creditors.

As Portuguese stocks plunged and country’s 10-year borrowing rates soared to critical levels, Prime Minister Pedro Passos Coelho held frantic talks to save his shaky coalition.

Late Friday, he announced that he had reached an agreement with Portas — who is also leader of the junior partner in the ruling coalition, to save the government from collapse.

The two men were to hold further negotiations on Saturday evening (from 1700 GMT), before making a statement.

However, any political deal would have to have the support of President Anibal Cavaco Silva, who has the power to dissolve parliament and call for elections.

Unions are piling on the pressure by calling a demonstration from 1400 GMT in front of the presidential palace to demand the government’s resignation.

At the heart of the crisis are the painful economic reforms pushed by Passos Coelho’s coalition in exchange for desperately needed loans from the “troika” of international creditors — the European Union, the European Central Bank and the International Monetary Fund.

The austerity measures including layoffs and higher social security contributions have thrown Portugal into a deeper recession with higher unemployment than had been expected, sparking mass protests and strikes.

The government expects the economy to contract by 2.3 percent by the end of the year, while the unemployment rate has soared to a record 18.2 percent.

Despite growing opposition to the reforms, the government is under pressure to present another 4.7 million euros in spending cuts to the troika when its auditors visit Portugal on July 15.

According to a survey published Saturday by the bi-weekly Expresso, 37.2 percent of those surveyed said they favour early elections, while 45.1 percent wanted the status quo or a new government headed by the president.