4 Jul 2013

Bond costs rising for Portugal

8:39 am on 4 July 2013

Borrowing costs for Portugal have risen sharply amid fears of a growing political crisis there.

Yields on 10-year bonds moved above 8% at one point on Wednesday, while the stock market closed down 5.3%.

Portugal received an EU bailout worth more than 78 billion euros in May 2011, on the condition that it implemented austerity measures.

On Monday, Finance Minister Vitor Gaspar resigned, followed on Tuesday by Foreign Minister Paulo Portas, who heads the Popular Party - the junior partner in the coalition government.

The resignations were due to disagreements over Portugal's austerity programme.

Prime Minister Pedro Passos Coelho has pledged to stay in office, but the BBC reports it is not clear whether the Popular Party will continue to work with him.

Portugal has been in recession for two years and the economy is expected to contract by 2.3% this year.