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Portugal: snap election called for June 5 as bailout looms

Portugal's president dissolved parliament on Thursday and set a snap general election for June 5, warning the next government faced an "unprecedented economic crisis."

Portugal euro 2011 3 31Enlarge
Portuguese president Anibal Cavaco Silva addresses the nation from Belem presidential palace in Lisbon on March 31, 2011, to announce his acceptance of the prime minister's resignation and the dissolution of the parliament. Cavaco announced also his calling snap elections for June 5, 2011. (Francisco Leong/AFP/Getty Images)

Portugal's president dissolved parliament on Thursday and set a snap general election for June 5, warning the next government faced an "unprecedented economic crisis."

Lisbon admitted that it missed its budget deficit target for 2010 with borrowing at a crippling 8.6 percent of GDP rather than the 7.3 percent expected, bringing Portugal under renewed pressure follow Greece and Ireland in taking a bailout from the European Union and International Monetary Fund.

Portuguese politicians blamed the size of the deficit on Eurostat, the European statistical agency, which it said made alterations in calculation methods that led to a surprise final figure reflecting nationalised bank losses and the state of public transport companies — a move they said was "like changing the score after the match is over."

Otherwise, they said, the deficit would have been 6.8 percent.

The revelation, according to the Telegraph, "carried unpleasant echoes of the admission from Greece at the end of 2009 that its finances were in a worse state than at first believed." That shock, the Telegraph wrote, "ignited the euro zone's debt crisis as investor fears over nations' borrowing escalated," while Greece took a €110 billion ($156 billion) rescue package.

Prime Minister Jose Socrates resigned last week after the opposition rejected his government's austerity measures, prompting downgrades by rating agencies, pushing bond yields to new euro-era highs and raising pressure on the country to ask for a bailout.

President Anibal Cavaco Silva said, according to Reuters: "I took the decision to call a general election given the clear degradation of the political situation, shown by the growing difficulty of the minority government and the opposition in agreeing on measures to overcome the economic and social problems Portugal faces."

http://www.globalpost.com/dispatch/news/regions/europe/110331/portugal-socrates-election-euro-finance-europe