by Richard Barley
Wall Street Journal
March 23, 2011
The euro-zone crisis may be back. The Portuguese minority government faces a key vote on austerity measures Wednesday, and Prime Minister José Sócrates has said he will resign if the opposition doesn't support them. The chance Lisbon will have to ask for aid from the euro zone is rising. But this is just the most imminent political risk; national and European interests are colliding from Helsinki to Dublin.
Portugal's opposition party is refusing to support the latest set of austerity measures designed to help the country cut its budget to 4.6% of GDP this year. A political vacuum in Portugal would clearly damage its already hobbled access to capital markets; five-year bond yields have spiked to above 8%. While analysts believe Lisbon has cash to cover a €4.3 billion ($6.1 billion) bond repayment in April, another €5 billion payment is due in June.
A Portuguese bailout request in itself wouldn't be a shock; many investors have assumed it is inevitable. But tensions could run high if political wrangling complicates the negotiations for a support package.
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