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TheStreet Open House

Portugal Politicians In Talks Over Gov't Future

By BARRY HATTON

LISBON, Portugal (AP) â¿¿ The leaders of Portugal's governing coalition parties remained locked in negotiations Thursday as they attempted to repair differences that threatened to pitch the bailed-out country into turmoil and reignite concerns over Europe's debt crisis.

Prime Minister Pedro Passos Coelho, head of the senior coalition partner, and the leader of the junior partner, Popular Party chief Paulo Portas, met three times in 24 hours in an attempt to avoid the government's collapse in a dispute over austerity measures and other reported grievances concerning the relative standings of the two parties within the coalition. There was no immediate word on the progress of the talks.

Portugal's political stability, certainly compared with turmoil in Greece, has helped ease investor concerns over the country's financial fate since a 78 billion euro ($101 billion) international rescue two years ago.

The relatively calm backdrop helped lower Portugal's borrowing costs and allowed it to enact a raft of economic reforms which European Central Bank president Mario Draghi on Thursday described as "remarkable."

German Finance Minister Wolfgang Schaeuble said he didn't expect any contagion from Portugal's difficulties to spread to the 16 other European countries which use the euro currency.

"I think the euro is now viewed on the world's financial markets as so stable that domestic political situations in individual countries ... don't mean a crisis for the stability of the euro as a whole," Schaeuble said in Berlin.

Investors had a different opinion, however, and Portugal's troubles helped send European and Asian stocks lower this week before recovering Thursday after the governing partners pledged to settle their differences.

Portas's resignation as Portuguese foreign minister earlier this week, after his demands for less austerity and more growth measures went unheeded, plunged the country into crisis mode.

The resignation of Finance Minister Vitor Gaspar, a technocrat with no party affiliations, on Monday fueled fears of a political meltdown. Gaspar complained he lacked political and public support for his austerity program.

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