Portugal crisis overshadows summit

EU leaders are grappling with a new
eurozone threat after Portugal’s parliament rejected an austerity budget and PM
Jose Socrates resigned.

The vote means an international
bail-out, similar to those accepted by Greece and the Irish Republic last year,
is now far more likely.

Mr Socrates said opposition parties
had “removed from the government the conditions to govern”.

The EU summit in Brussels is aimed
at tackling the eurozone debt crisis.

Although the situation in Libya and
recent events in Tunisia and Egypt are high on the agenda, the summit has been
billed as the moment the 27 EU member states adopt a “comprehensive
package” on stabilising the eurozone.

As part of the deal, the lending
capacity of the European Financial Stability Facility (EFSF) would be raised
from $354 billion to $624 billion.

 The EFSF is due to be replaced by a permanent
European Stability Mechanism

But EU governments have not yet
nailed down their national contributions to the augmented EFSF and Portugal’s
uncertain politics makes unanimity more difficult.

Portugal faces bond repayments of $6
billion on 15 April and, in a national address Mr Socrates warned that the
political crisis would have “very serious consequences in terms of the
confidence Portugal needs to enjoy with institutions and financial

The Fitch rating agency downgraded
Portugal’s sovereign credit rating from A+ to A- on Thursday.

A bail-out for Portugal could total
about $113 billion analysts say.