Portuguese Parliamentary Affairs Minister Relvas Resigns

Parliamentary Affairs Minister Miguel Relvas resigned today, saying he didn’t have the “state of mind” to continue.

“I’m leaving of my own will,” Relvas said at a news conference in Lisbon today. The decision was taken “weeks ago” with the prime minister, he said. Prime Minister Pedro Passos Coelho plans to appoint a replacement “at an opportune moment,” according to a statement from his office.

The resignation comes as Coelho battles rising joblessness and lower demand from European trading partners and raises taxes to meet the terms of a 78 billion-euro ($101 billion) aid plan from the European Union and the International Monetary Fund. The government on March 15 announced wider deficit targets as it forecast the economy will shrink twice as much as previously estimated this year.

The yield on Portugal’s 10-year bond rose eight basis points today to 6.40 percent. That compares with a 12-month high of 12.67 percent reached on April 16 of last year.

Coelho is also facing a pending high court ruling on the legality of elements in this year’s budget that may limit the government’s ability to comply with terms of the bailout. President Anibal Cavaco Silva and different political groups asked the court to review some points of the budget, including taxes on pensions.

The decision may have a significant effect on Portugal’s budget as there is limited room for the government to increase taxes or cut spending if the budgetary gap is large, BNP Paribas economist Ricardo Santos said in a note yesterday.

Abebe Aemro Selassie, head of the IMF’s mission to Portugal, said in a Jan. 18 conference call that the court has been asked to review a “relatively small part” of the budget’s measures and that he didn’t think the review could bring the whole program “off course.”

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