Portugal 'edging closer to bailout'

24 March 2011

Portugal appears to be edging closer to an international bailout following the resignation of prime minister Jose Socrates, it has been claimed.

The politician stepped down from his post after plans to reduce the budget were rejected by parliament - and Royal Bank of Scotland Group economist Jacques Cailloux noted a help-out package is now inevitable, Bloomberg reports.

Mr Cailloux explained that the market is likely to deteriorate in the absence of other measures going through, adding: "There is obviously the risk of further downgrades, which will become anticipated by the markets and be a self-fulfilling prophecy."

Portugal's president Anibal Cavaco Silva said he is to meet up with the country's main parties following Mr Socrates' announcement, but the current government will remain in place until the resignation is fully accepted.

A recent survey carried out by Standard & Poor's found that Europe's banks would require $355 billion of new capital if a stress scenario - including further economic downturns in Portugal - was to take place between 2011 and 2015.

By Gary Cooper

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