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Portugal Politicians In Talks Over Gov't Future

Passos Coelho, the prime minister, refused to accept Portas's resignation and appealed for talks which began Wednesday night.

Passos Coelho met Thursday with President Anibal Cavaco Silva, who has to endorse any change in the Cabinet. Passos Coelho didn't reveal how the negotiations were going but said his coalition partner had given him assurances it didn't want to prolong the political instability.

Investors breathed a sigh of relief as the quarreling subsided. The interest yield on Portugal's benchmark 10-year bond slipped back to 7.21 percent after soaring above 8 percent the previous day. Though the rate is still far above the 5.23 percent it reached in May, it is way down on the 9.77 percent it was at the same time last year.

The Lisbon stock exchange also rallied, rising 3.73 percent to 5,431 at the close, after plunging 5.3 percent on Wednesday.

"Basically what the market is doing today is understanding that ... there is a big chance of an understanding between the partners in the coalition, and that situation is being reflected in stronger share prices," said Paulo Guerrero, a broker at Espirito Santo Investment Bank in Lisbon.

People in the streets, however, were less forgiving.

After enduring two years of austerity, that have included sharp hikes in income taxes and in sales taxes and cuts in public sector pay and pensions, the country has been mired in recession and seen its jobless rate ratchet up to 17.6 percent.

Among the Portuguese, exasperation with their political leaders was evident.

"It's a joke," said Filipa Pinto, a 51-year-old housewife sitting in the shade on a scorching hot day in Lisbon. "We're fighting to pay our bills at the end of the month and they're playing games."

"It just shows you can't trust politicians," said 21-year-old mechanical engineering student David Guedes outside Lisbon's Technical University. "They're interested in themselves, not the people."

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