Lisbon stock market suffers “largest losses in the world”

Two billion euros was wiped off the value of Lisbon’s stock market yesterday as parliament launched into the two-day debate that is expected to see the fall of Portugal’s minority centre-right government.

Despite platitudes coming from Eurozone ministers – affirming that whichever government emerges from the nation’s political mire, they are certain Portugal will honour its international commitments – pension funds, insurance companies and investment groups showed they were far from convinced that the country was heading in the right direction.

The “announced death of the government” expected to follow today’s motion of rejection from the PS Socialist party has also seen interest rates on 10-year bonds increase by 2.88% and risk premiums rise 210 points, which national tabloid Correio da Manhã explains is the “lowest value since July”.

Banks too are showing concern, with Germany’s Commerzbank producing a document for its clients entitled: “Portugal. The next Greece?” in which inhouse economist Ralph Solveen says that a left-wing government will mean “a radical change to economic policies”.

Fears have also been expressed in Spain where Avanza is waiting to see what will come of the agreement made over the privatisation of Lisbon’s Metro and Carris transport network, while Alsa is in the same position over the purchase of Porto concession STCP.

With centre-right MPs making much of the folly of a left-wing executive, two demonstrations are scheduled in front of parliament today. One will involve pro-government forces, while the other promises to bring trade unionists from all over Portugal “determined to see an alternative after four years in which workers of this country have been hammered”.

Outwardly, Passos Coelho remains in fighting mode – deriding what he calls the Left’s “negative and ruinous policies for Portugal”.

Meantime, newspapers are making much of the fact that PS leader António Costa appears to be biding his time, not saying a word during yesterday’s initial debate.

He is described as waiting until the close of business today before he says anything, but the stance has seen him variously ridiculed, dubbed a coward and otherwise slated by Opposition forces.

Incredible as it may seem, two days into this nail-biting week and no-one seems any the wiser as to the likely outcome.

Writes CM today: “The scenario of the swearing in of António Costa as prime minister is gaining force but at the same time there is the rumour that the Head of State Cavaco Silva could resign in order to avoid paving the way to an executive supported by the PCP (communist party) and BE (Left bloc)”.

The second day of debating the current government’s apparently doomed programme is expected to take up to nine hours.

Thus, for now, it is a case of all eyes on Lisbon.

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