Portugal Government Collapses as Austerity Measures Rejected; EU Meets

As expected, the Portuguese parliament voted down fresh austerity measures on Wednesday, and Jose Socrates resigned as prime minister. However, he said that he would still attend the European Union (EU) summit meeting convening Thursday in a caretaker role. Whether that would lead to any action is doubtful, however, as disagreement among euro zone members makes it unlikely that any action will be taken on what was expected to be one focus of the meeting: strengthening the European Financial Stability Facility (EFSF).

Reuters reported that in the wake of the vote, Socrates maintained his staunch opposition to requesting a bailout from the EU and the International Monetary Fund (IMF). He may not be alone in that opinion, either, since most of the Portuguese parliament is opposed to asking for aid, and any bailout package offered would have to be approved by its vote. Socrates will likely remain at the head of a caretaker government until a new one is formed in the wake of his resignation.

Smooth sailing is not expected at the EU gathering, either, with discord over the EFSF likely to delay action on strengthening the rescue mechanism. Originally the meeting was supposed to see an agreement on a “comprehensive package” of steps to be taken to relieve the debt crisis. Disagreements, however, have led to lowered expectations and now no agreement is expected before the middle of the year—perhaps prior to the next EU meeting in late June.