Portugal Rejecting Austerity Measures, Government Ready to Collapse

In what could be one of the most underreported financial stories, possibly bordering in the dereletion of duty by journalists and media outlets, the EU is again in danger concerning the ongoing sovereign debt crisis, as main opposition parties in Portugal are now saying the won't back a new set of austerity measures to battle the out-of-control debt the country has in place.

The new steps are likely to be rejected in a parliamentary vote expected Wednesday and the timing could not be worse. A defeat in the vote, Prime Minister Jose Socrates warned, would trigger his government's resignation, consigning Portugal to at least two months of political limbo just as officials were hoping to boost investor confidence in the country's future.

"At this point, a political crisis is a big push towards the country resorting to outside help," Finance Minister Fernando Teixeira dos Santos said.

The national political crisis also threatens to set back Europe's broader plan to stamp out the debt market jitters -- leaders at a two-day summit starting Thursday will seek to ratify key changes to the bloc's rescue fund and spare Portugal the need to surrender policy decisions to outside authorities through a bailout.

The new European policy would allow the fund to purchase government debt, easing market pressure which has driven the borrowing costs of weak countries to unsustainable levels. European leaders hope the response will herald the end of the debt crisis that has dragged on for more than a year.

That deal, however, was contingent on Portugal implementing the austerity measures that are unlikely to survive the country's political standoff.

Portugal's center-left Socialist government, which has insisted it doesn't want or need a bailout, won the backing of the European Central Bank and the European Commission for that new austerity plan. The ECB has already been helping Portugal by buying its government debt and providing funds to its banks.

The condition of the EU in reference to sovereign debt is tenuous at the very best, and any set of events could trigger the contagion they're in deathly fear of, regardless of the bailing out of smaller countries giving the appearance that the matter has been taken care of.

Greece, and now Portugal, show that the underlying reasons for the debt crisis in the first place, the socialist ideology of governments taking the place of God and being the provider of just about everything, has proven again to be a fallacy and based in an unsustainable idea that you can continue to steal from the productive and redistribute wealth to the unproductive.




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