Cameron’s €4 billion Portuguese challenge

As if the budget and Libya weren’t enough, the UK Government woke up today with another major challenge on its hands – yet another flare-up in the eurozone debt crisis, which has been continuing to bubble away under the radar.
 
Yesterday, Portugal’s Prime Minister José Sócrates literally walked out of Parliament, during a debate on EU-backed austerity measures. The austerity package was subsequently voted down and shortly afterwards Sócrates announced his resignation. Portugal is now facing the prospect of being without a government for months, as its electoral rules require a 55 day break between the dissolution of Parliament and new elections.
 
The episode has increased the already heavy market pressure on Portugal’s finances. That the country will be the third of the eurozone dominos to ask for an EU/IMF bail-out looks almost inevitable. In 2011, the country needs to refinance 25 percent of its national wealth – in relative terms, this is even more than Greece.