If Portugal had hoped that as a result of this weekend's political manoeuvering, which preserved the tenuous majority of the Coelho coalition cabinet by granting the previously resigned CDS-PP leader Paulo Portas the vice-premiership, thus "forcing" him to rescind his resignation and prevent a government collapse, it would project a vision of political stability, it may need to reevaluate as moments ago the leader of the Socialist Party (the biggest opposition party) Antonio Jose Seguro reaffirmed a call for Portugal to have early elections. Quote Seguro: "Our country is faced with the need to negotiate a new program, which may be called a precautionary program or anything else. Only a new government would have the democratic legitimacy to negotiate a new aid program for our country." Seguro spoke to reporters in Lisbon after meeting Portuguese President Anibal Cavaco Silva.
Whether the austerity-burned country whose political leadership credibility already lies in tatters following the resignation of finance minister Vitor Gaspar succeed in delaying an early day of reckoning which will bring back the bond fireworks, is unknown but as Deutsche comments, it doesn't look good.
From Deutsche: "In the European rates market, Portuguese 10yr bonds rallied 20bp to close below 7% for the first time in almost a week. This followed the weekend’s news that PM Coelho had managed to salvage the coalition, but as DB’s Gilles Moec highlights, it came at a high political price. Indeed, CDS-PP leader Paulo Portas accepted to rescind his resignation from government to become officially vice- Prime Minister (a function last used 30 years ago) and more crucially will be overseeing economics and government reform as well as the relationship with the troika. Gilles believes that while the market may welcome this as a first step to lesser political uncertainty, it does create problems both externally (the government’s relationship with the Troika) and internally (coordination with the “harder line” Finance Minister). Gilles continues to think that the Europeans need to find a solution to fund Portugal after 2013 to allow it to continue the adjustment away from immediate market pressure."