At a crunch summit last weekend, euro-zone leaders agreed to expand the euro rescue fund to make more money available for lending to cash-strapped countries. Now it seems that the move came just in time. Portugal is looking increasingly like the next candidate for a bailout from the euro-zone pot.
Lisbon's borrowing costs are approaching the point of no return as market confidence in the country's creditworthiness continues to sink. More significantly, the nation is heading toward a political crisis after the opposition declared it will no longer support the government's austerity measures.
Earlier this week, Socialist Prime Minister Jose Socrates warned that his minority government could not continue if the Portuguese parliament does not approve the latest batch of austerity measures. That would mean new elections, two years ahead of schedule.
The austerity measures, which were unveiled last Friday and are the fourth round in less than a year, are intended to restore market confidence in the country and lower its borrowing costs. They include tax hikes and cuts in spending on education, health and pensions.
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