21 Jul 2013

Bailout crisis talks break down in Portugal

9:00 am on 21 July 2013

A week of talks by the three main parties in Portugal on how to end a political crisis has broken down, leaving the bailout programme in doubt.

President Anibal Cavaco Silva is seeking a "national salvation" deal on austerity policies demanded by EU and IMF lenders.

But opposition leader Antonio Jose Seguro said the governing coalition had rejected most of his party's proposals.

He said it was now up to the president to decide how to end the crisis which began nearly three weeks ago with the resignation of two cabinet ministers.

Foreign Minister Paulo Portas was unhappy with the extent of the austerity measures needed to comply with the conditions set in the 78 billion euros ($US102 billion) bailout in May 2011.

Finance Minister Vitor Gaspar, who was seen as the architect of austerity, quit because of a lack of support for his approach.

Lisbon has had to request a delay in the eighth review of the bailout by its creditors. The review was due to start last Monday but has been put back until the end of August or early September.

The BBC reports coalition parties made no comment in the immediate aftermath of the talks on Friday.

Analysts say the president could still avoid an escalation of the crisis by keeping the governing coalition in place rather than calling a snap election.

Austerity cuts are widely blamed for keeping Portugal in recession over the past two years.