Quote:Worst fears over a collapse of the current Portuguese government did materialize after Portuguese parliament rejected the government's deficit-cutting plan, leading PM Socrates to submit his resignation. The politician was faithful to his promise to step down after having reiterated in the past he would be unable to run the country unless austerity measures aimed at putting order in the debt-stricken Portuguese finances were approved.
Elections are likely to take place in a few months' time. The setback was a much anticipated outcome since Portugal's opposition parties had been opposed for quite some time to back-up the austerity measures on the ground that these went too far. As expected, all five opposition parties turned their back to the government.
â€œIf parliament decides on a motion against the stability and growth program, that means the government is not in a condition to make commitments internationally,â€ Socrates said on March 15. â€œThat would mean a political crisis. In my understanding, the consequence of a political crisis is the worsening of the financing risks of our economy and would lead Portugal to request external interventionâ€ Bloomberg quoted.
Even before the news were made public, Portuguese ten-year bond yields had already soared to a euro-era high above 8%, showing the scarcity of confidence on the austerity vote succeeding. â€œWhenever yields of troubled nations such as Portugal, Ireland, and Greece rise there is a rational that fears are increasing, in turn Euro tends to lose valueâ€ explained Andrei Tratseuski, Director of Currency Research at Forex Club.
The Euro fell sharply against the Dollar, breaking past its pre-austerity vote announcement low at 1.4100, and despite bulls emerged quickly to claim higher ground, the price eventually landed at 1.4080 as the vulnerability of the Euro seems to return. The battle now will be between those favouring an ECB rate hike in April (bullish the Euro) and those new comers short the Euro on speculation the seek for a bail-out by Portugal may pose further trouble for EU policymakers.
Been looking for this to happen for a number of months, I'm beginning to wonder if France and Germany has the stomach for this & Ireland is next.
The Euro could very well be on it's way out, no tears except that of corrupt insiders.