Portuguese stocks tumbled the most since October 2008, after the leader of the second-largest party in the country’s coalition resigned, undermining the government’s ability to conduct business.
Banco Comercial Portugues SA declined the most in four weeks. Banco BPI SA retreated the most since November 2011. Banco Espirito Santo SA lost the most in three months. A gauge of banking shares had the biggest decline of the 19 industry groups on the Stoxx Europe 600 Index.
The benchmark PSI 20 Index (PSI20) slid 6.8 percent to 5,153.15 at 10:02 a.m. in Lisbon. Portuguese borrowing costs topped 8 percent for the first time this year after mounting opposition to budget cuts prompted the finance and foreign ministers to resign as the nation’s bailout program enters its final 12 months. The PSI 20 has fallen 19 percent since its 2013 high on May 7.
“The ghosts of the periphery are coming back, we cannot risk having a resumption of the crisis,” Alberto Espelosin, who helps oversee $1.5 billion at Abante Asesores Gestion in Madrid, said in a phone interview today. “This will put pressure on the European Central Bank to do something, to finally expand its balance sheet.”
ECB policy makers including President Mario Draghi have said they’ll maintain a loose monetary stance for as long as needed, while urging euro-area governments to cut their deficits and boost investment. The Euro Stoxx 50 Index (SX5E) fell as much as 35 percent in 2011 as a euro-area debt crisis grew.
Portuguese Prime Minister Pedro Passos Coelho told voters in a televised speech from Lisbon yesterday that he’s trying to hold his government together.
Foreign Affairs Minister Paulo Portas, leader of junior coalition party CDS, quit in protest at the government’s budget policy. He was the second minister to resign this week after finance chief Vitor Gaspar stepped down, saying his credibility had been compromised by the government’s failure to meet budget targets set by the European Union.
Portas disagreed with the prime minister’s decision to name Secretary of State for Treasury Maria Luis Albuquerque as a replacement for Gaspar, saying it would mean a continuation of the policies deepening the country’s recession.
Banco Comercial slumped 15 percent to 7.9 euro cents. BPI declined 13 percent to 78.4 cents. Banco Espirito Santo dropped 12 percent to 53.9 cents.
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