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Portugal Party Talks to Continue as President Remains Confident

July 19 (Bloomberg) -- Talks between Portugal’s ruling coalition parties and the main opposition Socialist Party are set to continue after a fifth round of meetings yesterday failed to produce a deal on how to meet the terms demanded by a European Union-led bailout.

“The process is not over,” Jorge Moreira da Silva, the head of the Social Democratic Party delegation, said in comments broadcast by SIC Noticias television channel as he left the meeting in Lisbon yesterday. The Social Democratic Party holds a majority in parliament together with the smaller CDS party. All three parties have given themselves until July 21 to reach an accord.

President Anibal Cavaco Silva, who has the power to dissolve parliament, called on the 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.

‘Going as Expected’

The president, who has an adviser present in the talks as an observer, said he remains confident the parties will be up to the challenge of overcoming the current emergency. His comments were made after the fifth round of talks ended.

“Things are going as expected,” Cavaco Silva said in comments broadcast by TVI television station.

“I’m confident, but I’m not sure what the final outcome will be,” Cavaco Silva said from Portugal’s Selvagens Islands in the Atlantic Ocean, southwest of the mainland. He is scheduled to return to Lisbon this morning.

The two governing parties settled a split over budget policy on July 6, with Coelho offering CDS leader and Foreign Minister Paulo Portas the post of vice premier and control over economic policy. While ruling out early elections at the time, the president didn’t endorse their deal, calling for a broader pact also involving the Socialists.

Coelho said in parliament yesterday he plans to go ahead with a proposed government reshuffle if the two governing parties and the Socialists reach an agreement.

Portugal’s 10-year bond yield fell 19 basis points to 7.02 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 eighth review of Portugal’s progress on meeting the terms of the 78 billion-euro ($102 billion) aid program has been pushed back to the end of August or the start of September because of the political situation, the Finance Ministry said on July 11. The review had been due to start on July 15.

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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