The resignation of the Portuguese government because it could get enough support in parliament for its latest austerity plan makes it all-but-certain the debt-laden country will have to accept the financial rescue Lisbon has denied for so long that it needs.
Amid the political and financial uncertainty, Portugal cannot sell government bonds to finance its spending. Economist Camilo Lourenço said: “Investors, looking at the situation and the country’s lack of government, are afraid to lend us money, even at high interest rates. In those circumstances, we would need help from the European Financial Stability Facility.
He added: “We have not had any credibility with the markets for a long time and I’m sure the latest austerity plan wouldn’t change that much.”
But Portugal’s top politicians have said there will be no request for aid at least until elections are held and a new government formed, which will take about two months.
As well as the EU, the IMF could provide bailout money and the head of euro zone finance ministers group Jean-Claude Juncker said 75 billion euros would be an “appropriate” amount.