Portugal PM defiant despite another resignation

LISBON, Portugal – Portugal’s prime minister defied calls to resign Tuesday after his coalition government was rocked by a second Cabinet resignation in as many days over tough budget cuts that have sharply reduced living standards in one of the poorest countries that uses the euro.

The uncertainty over the future of the Portuguese government creates a new flashpoint in the austerity strategy that’s been pursued by the 17-country eurozone to deal with its debt crisis.

With the center-right government looking to be on the verge of collapse and facing mounting pressure from opposition parties, Pedro Passos Coelho made a televised evening address to the nation to say he would seek to heal the rift between the two coalition partners and examine the reasons for the surprise resignation of Foreign Minister Paulo Portas earlier in the day.

Portas, leader of the junior coalition partner, quit a day after Finance Minister Vitor Gaspar also walked out.

Gaspar, a non-political economist specially selected by Passos Coelho to push the austerity drive, said he lacked the political and public support for his ongoing program of cutting public sector pay and pensions and raising taxes.

Portas, the leader of the Popular Party who has demanded greater emphasis on growth measures, said he could not accept Gaspar’s replacement, former Secretary of State for the Treasury Maria Luis Albuquerque.

She has endorsed the austerity approach that the country, one of the 17 European Union countries that use the euro, has pursued since its 78 billion euros international bailout ($102 billion) in 2011 after a decade of weak growth and mounting debt pushed it to the verge of bankruptcy.

Passos Coelho, who is leader of the senior coalition member, the Social Democratic Party, said he wouldn’t be rushed into accepting Portas’s resignation because “the threat of political instability brings risks for the country nobody wants and could be grave.”

“Let me be clear,” Passos Coelho said, “I won’t resign, I won’t give up on my country.”

The Social Democrats have just 108 seats in the 230-seat Parliament, meaning that without its Popular Party partner’s 24 seats it wouldn’t have the majority it needs to push through its policies.

Though Portas did not say whether his party would pull its support from the government, the resignations pitched what for two years had been a stable administration into disarray within the space of 24 hours. It recalled the political strife that has dogged Greece’s efforts to recover from its own bailout – last month, a junior partner quit Greece’s government, leaving the remaining two coalition partners with a slender majority in parliament.

For over three years now, the austerity demanded by creditors has met with growing resistance from politicians, trade unions and business leaders. Austerity has been widely blamed for driving the jobless rate in Portugal to 17.6 percent and for what is forecast to be a third straight year of recession in 2013.