Portugal on brink of bail-out as PM resigns

The prime minister of Portugal, Jose Socrates, has submitted his resignation after his government's austerity package, designed to combat the country's debt burden, was rejected in parliament.

The development puts Portugal on the brink of needing a bail-out, as markets lose confidence in the country's ability to repay its loans. The yield on its 10-year bond has already risen to 7.77 per cent, whilst its five-year bonds hit a euro high of 8.2 per cent. Economists see costs above 7 per cent as critical.

An election would take 55 days to organise, putting further pressure on the country's economy.

Meanwhile, EU leaders postponed a decision on the new €440bn bail-out fund. This could further worry markets already on edge about the prospect of Portugal's economic collapse.

Read a full report at the Guardian. ·