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Portugal's PM Claims to Find a 'Formula' for Government Survival

  • Selah Hennessy

Portugal's Prime Minister Pedro Passos Coelho addresses a news conference in Berlin, July 3, 2013.

Portugal's Prime Minister Pedro Passos Coelho addresses a news conference in Berlin, July 3, 2013.

Portugal's prime minister says he has negotiated with his coalition partners to keep his government intact despite two top resignations this week. The government has been on the brink of collapse after struggling to fulfill tough bailout conditions.

After holding crisis talks with Portugal’s President, Prime Minister Pedro Passos Coelho said he had found a "formula" that will hold his government together.

"I will do everything to guarantee the necessary solutions that will enable the government to work towards fulfilling its economic and financial program," said Coelho.

The details of the agreement were not made public.

The future of Coelho’s government was in question this week after two top ministers stepped down.

The resignations were tied to Portugal’s austerity drive, but Coelho says his government must push ahead to cut spending.

"It guarantees Portugal will be able to borrow money in the future. All the sacrifices and efforts of the Portuguese people, he said, will be rewarded by the consistent and solid results that they are achieving," he said.

Two years ago, Portugal received an international bailout worth about $100 billion - on condition that the country carries out stringent austerity measures.

Its international lenders are due in Portugal later this month to assess the country’s progress and will be expecting the government to present yet more spending cuts.

Up until now, the government has been pursuing austerity robustly - some have described the country as a "poster child" for the Europe-wide austerity drive. But the measures have dwindling public support.

The country is in its worst economic slump since the 1970s and unemployment stands at 18 percent.

Christian Schweiger is a Europe expert at Durham University. He says Coelho may be able to hold his government together for now, but the underlying problems are not about to go away.

He says the unemployment problem in Portugal and other euro countries is a growing headache for governments.

"We have obviously the wider problem of spiraling unemployment in the eurozone. Youth unemployment [is] between 40 and 60 percent in Spain, Portugal, Greece, Italy - there seems to be a whole lost generation coming up in southern Europe," said Schweiger.

Youth unemployment in Portugal is 43 percent. Schweiger says with growing discontent linked to poverty, European governments may increasingly find themselves in the position that Coelho is in today - torn between its voting public and its international lenders.

"If more and more young people across the eurozone and across the EU as a whole find that there is no future for them, and that politicians cannot offer them any solutions in terms of getting them into a career, making sure that they can make ends meet to a certain degree - then of course we will see mass demonstrations and they could be as bad as we currently see in the Middle East," he said.

This week’s political turmoil in Portugal caused markets to plunge on Wednesday - but they rallied after Coelho gave assurances of the government’s stability.