Portugal leaders seek to end 1-week crisis

Portugal's leaders sought Tuesday to cap a one-week political crisis that pushed the government to the brink of collapse and raised fears for its 78-billion-euro ($100-billion) international bailout. Prime Minister Pedro Passos Coelho appeared to have assured the survival of the coalition led by his Social Democratic Party, albeit at the price of promoting his foreign minister to the position of deputy prime minister. The political deal, reached Saturday, now needs just the widely anticipated seal of approval of Portuguese President Anibal Cavaco Silva who was holding consultations with various party representatives. The coalition had seemed to be on the verge of a break-up last week after Paulo Portas said he was resigning as foreign minister, one day after the shock departure of then finance minister Vitor Gaspar. Portas is pivotal to the government's survival because he is also leader of the ruling coalition's junior partner, the conservative CDS-PP. Instead of leaving the coalition, however, after days of negotiations Portas was promoted Saturday to the post of deputy prime minister in charge of coordinating economic reforms required under the May 2011 bailout programme. "We believe that we have the conditions for stability ... which is important for the conclusion of the economic and financial stability programme that Portugal has negotiated with its creditors," Portas said Tuesday after a meeting with Silva. "We believe the priority now is to open a cycle that, without forgetting the country's financial obligations, puts the focus on ... the economy, business, job creation and social cooperation," said Portas, who favours easing the grip of austerity. The political crisis raged just ahead of a July 15 visit by representatives of Portugal's troika of creditors -- the European Commission, European Central Bank and IMF -- to assess the state of Portugal's accounts. Portas had handed in his resignation on July 2 in disagreement with the premier's' choice of new finance minister, Maria Luis Albuquerque, who was expected to pursue austerity policies in the teeth of growing public protest. Albuquerque said, however, that she would work with the new deputy prime minister. "Working side by side in the same direction strengthens our positions rather than weakening them," said Albuquerque. Albuquerque's appointment last week was welcomed by ECB president Mario Draghi, who said the country was "in good hands". EU Economic Affairs Commissioner Olli Rehn said he had no doubts over her abilities. Portugal's president must give his approval to the reshuffled coalition, which has been in power since June 2011. Following his meeting with Portas, the president held talks with the opposition Socialist Party chief Antonio Jose Seguro, who has pressed for snap elections. The president will then meet with the prime minister. The head of state is to meet with workers' representatives on Wednesday before making an announcement, possibly in an address to the nation. Most analysts say there is little doubt the president will approve the reshuffle. But Portugal still faces formidable challenges: an expected economic contraction of 2.3 percent this year and a record unemployment rate of more than 18 percent. Some financial analysts foresee a new bailout for the country, renewing concerns about the indebted economies of the eurozone's periphery.