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European debt crisis returns -- in Portugal

Portuguese Prime Minister Jose Socrates speaks during a press conference.

STEVE CHIOTAKIS: In Portugal, a budget vote today to reduce the country's debt could force the prime minister to resign. If the government does fall, that pushes Portugal one-step closer to a massive European bailout.

The latest from Marketplace Europe correspondent Stephen Beard.


STEPHEN BEARD: The Portuguese government has been struggling to reduce its budget deficit. So far it has failed. The latest measure is the fourth attempt in less than a year. The plan to raise taxes and cut public spending is deeply unpopular. Lawmakers are thought likely to reject it today. And if they do, the Prime Minister says, he'll resign.

Kevin Dunning of the Economist Intelligence Unit says investors may stop buying Portuguese government bonds.

KEVIN DUNNING: I think the situation is going to wind up that Portugal ends up seeking a bailout from its European partners in the same manner that Ireland and Greece had to.

This would be a further setback for the group of countries that use the euro. The Portuguese crisis would inflict maximum embarrassment. Tomorrow European leaders meet for a major summit to approve a new, beefed-up euro bailout fund.

In London this is Stephen Beard for Marketplace.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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