Portuguese Parties to Hold Fifth Day of Talks on Salvation Pact

Portugal’s two ruling coalition parties will hold a fifth day of talks today with the main opposition Socialist party as they seek an agreement on how to meet the terms of the country’s bailout program.

The Social Democratic Party announced talks had been halted and would resume later today in an e-mailed note received just before 1 a.m. in Lisbon. While demanding, talks are being carried out with a “spirit of openness,” Prime Minister Pedro Passos Coelho’s Social Democrats said in a separate statement at about 9:30 p.m. last night announcing a one-hour break in the negotiations.

President Anibal Cavaco Silva, who has the power to dissolve parliament, called on the three parties on July 10 to reach a “national salvation” agreement that will allow Portugal to complete its aid program through June 2014 and set early elections for after that date. He also urged them to ensure debt will be sustainable with a new government after the European Union-led bailout ends.

The Social Democratic delegation at the talks is led by Jorge Moreira da Silva, while the Socialist Party’s team is led by Alberto Martins. Pedro Mota Soares heads the delegation from the CDS, the second coalition party. David Justino, an adviser to the president, has also attended the meetings.

Bond Yields

The parties gave themselves one week to reach an accord when talks began on July 14. Portugal held its first bill auction in four weeks yesterday, with borrowing costs rising to an average of 1.72 percent at a sale of 1.2 billion euros ($1.57 billion) of 12-month bills. That’s the highest since an Oct. 17 sale at a rate of 2.1 percent and up from 1.232 percent at the previous auction in May.

Portugal’s 10-year (GSPT10YR) bond yield rose 6 basis points to 7.21 percent yesterday, up from 6.39 percent on July 1, the day before a rift in the coalition emerged. The yield breached a seven-month high of more than 8 percent on July 3. The country pays 3.2 percent on its bailout loans.

The two coalition parties settled a split over budget policy on July 6 with Prime Minister Coelho offering CDS leader and foreign minister Paulo Portas the post of vice premier and control over economic policy. While ruling out early elections right away, the president didn’t endorse the new coalition agreement between Coelho and the CDS party, calling for a broader pact also involving the Socialists.

To contact the reporters on this story: Joao Lima in Lisbon at jlima1@bloomberg.net; Henrique Almeida in Lisbon at halmeida5@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net

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