LISBON – Portugal’s president consulted political leaders on Friday on whether to call a snap election — as most parties want — after the Socialist prime minister resigned. The crisis could force Portugal to request a bailout from the European Union and International Monetary Fund after months of desperate struggle to avoid one, becoming the third euro zone country to seek aid, after Greece and Ireland.
The crisis, which was sparked by parliament’s rejection on Wednesday of government austerity measures, prompted Standard & Poor’s and Fitch to downgrade Portugal’s credit ratings. S&P’s two-notch cut, which came with a warning it could downgrade the debt-laden state further as soon as next week depending on the final shape of the euro zone bailout fund, hit the euro, although the currency later recovered. S&P now rates Portugal lower than Ireland.
European leaders on Thursday gave themselves until June to finalise an increase in their temporary bailout facility, failing to deliver the “comprehensive package” to resolve the debt crisis they had promised for weeks. A sell-off in Portuguese bonds pushed the yield on its 10-year benchmark above 8 percent, a euro lifetime high and a cost of funding that is widely viewed as unsustainable.
The spread between Portuguese debt and safer German Bunds widened 13 basis points to 474 basis points, while the cost of insuring its debt against default also rose. President Anibal Cavaco Silva met first with the leaders of the small Green Party and the Communists, who both left saying they had recommended a snap election at the beginning of June.
“We think the best option is an election,” said Communist leader Jeronimo Sousa. “We pointed to the start of June as a possible time.” Cavaco Silva will meet with the main opposition Social Democrats and the ruling Socialists late in the afternoon.
