Portugal’s political crisis has continued to deepen, moving it closer to needing a second bailout.
The government is near collapse after the two coalition partners disagreed over austerity measures.
Desperately trying to avoid new elections, the president has called on the main parties to put aside their differences.
Shares went down and bond yields rose, but the financial markets believe whoever is running Portugal the original bailout terms will stand.
Rui Barbosa, an asset manager at Carregosa Bank said: “Turbulence is not good, the major hypothesis that’s on the table is the continuation of the agreements of the troika.”
That means continued austerity, which is what caused the political crisis in the first place.
The politicians are responding to public anger over the cut backs and tax hikes and the people continue to blame them for the mess.
Shopping in a Lisbon food market, Helena Antunes complained: “We don’t have politicians that are up to the job, the problem in our country is that we don’t have politicians who are able to govern a country as it should be governed. Everybody knows they are prepared to sacrifice other people, but they don’t make any sacrifices themselves.”
In addition a new election is unlikely to lead to a stable government and would interrupt the reforms that are part of the current bailout – which is due to finish in June 2014 – as well as negotiations with Portugal’s creditors.