Analysts Expect Portugal To Need EU Bailout

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Portugal looks like it's heading toward an international bailout, becoming the third European country to seek help after Greece and Ireland. After the Portuguese parliament rejected a series of austerity measures proposed by the prime minister, his government resigned. Since then, market pressures on Portugal increased, and the need for financial aid from the EU and IMF became all but inevitable.

RENEE MONTAGNE, host:

NPR's business news starts with Europe's debt crisis.

(Soundbite of music)

MONTAGNE: European Union leaders are in Brussels, trying to hammer out a long-term solution to the continent's financial woes. Their efforts are being complicated by a crisis in Portugal, which could be the third EU country to need a bailout.

NPR's Philip Reeves reports.

PHILIP REEVES: Maybe it'll be next month. Perhaps it'll be two months after that. Analysts can't be sure. But most agree on one thing: Portugal, a small, Southern European nation perched on the edge of the Atlantic Ocean, is going under. It, too, will likely soon need to be bailed out with loans worth tens of billions of dollars, just like Greece and Ireland.

Portugal's been limping along for months now, burdened by a big budget deficit and a mountain of debt. Now it has another problem. On Wednesday, opposition parties in Portugal's parliament banded together and threw out the government's latest austerity package. The prime minister responded by resigning. Portugal will be in political limbo until a new government's elected.

The markets are taking the news badly. Already, high interest rates for Portuguese bonds rose to record levels, way beyond what Portugal can afford, making a bail-out even more likely.

Portugal's crisis is the talk of the EU summit in Brussels right now. But EU officials are dealing with a larger issue. They're working on a system they hope will enable troubled nations to ride out these storms. So far, they've agreed to put far more money into the EU's bail-out fund and to make that fund permanent. Officials hope this will silence those who've been declaring that, in the end, Europe's single currency is doomed to fail.

Philip Reeves, NPR News, London.

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