It is widely seen as another weak link in the euro zone. Hence the need for Portugal to implement additional austerity measures to cut its excessive deficit.
With that in mind, Prime Minister Jose Socrates has been holding talks with the leader of the main opposition party. Socrates’ minority Socialist government needs the support of Pedro Passos Coelho’s PSD to pass bills in parliament.
Reports say proposals discussed include a five per cent wage cut for public company managers and politicians and a rise in VAT.
Austerity is also the watchword in Spain where the prime minister has set up out his belt-tightening plans to parliament. Jose Luis Rodriguez Zapatero intends to cut the salaries of state employees and slash investment spending.
It is all part of a coordinated euro zone push that has so far calmed the markets’ worst fears of a Greek-style debt crisis spreading.