Portugal’s president summoned the main political parties for crisis talks over the government’s future, with markets reeling on fears that a snap election could derail Lisbon’s exit from an international bailout.

Europe is set for a restless summer as the slumbering financial crisis reawakens. Luke Baker looks a problem that refuses to go away.

Portugal’s government is teetering on the brink of collapse, sending financial markets around Europe into a tailspin and reigniting concerns about the euro area’s strategy for dealing with its prolonged financial crisis.

Portugal’s foreign minister Paulo Portas resigned, the president’s office said yesterday, in a further blow to the centre-right coalition that has kept the country’s international bailout on track.

Portuguese people will suffer from cuts to schools and hospitals to protect civil service benefits after the constitutional court rejected austerity measures that would have reduced holiday bonuses and other public sector perks.

Portugal has been warned of further spending cuts, following two years of tough austerity measures since it needed an international financial rescue.

Portugal’s prime minister last night told his country to brace for harder times after a court ruling forced his government to find more savings through spending cuts.

A political crisis in Portugal threatens to plunge the euro back into crisis just as experts were cautiously predicting that EU economies would start growing again next year.

THE euro faces a decisive week as European Union leaders, urged on anxiously by the United States, seek agreement on the definitive rescue plan that has eluded them for two years.

Portugal’s prime minister warned his country to prepare for deepening hardship next year as it struggles to climb out of debt.

Portugal’s financial plight deepened today with borrowing rates jumping higher and stocks slumping after its bonds were downgraded to junk status.

PORTUGAL’S center-right Social Democrats had little time to savour their return to power yesterday, launching immediately into getting a ruinous debt burden under control.

Portugal’s Social Democrats unseated the Socialist government in an emphatic election victory, giving the centre-right party a strong mandate to enact a grinding austerity programme demanded in return for a €78bn international bail-out.

THE Portuguese went to the polls yesterday to elect a new government which will lead the nation through a period of deep austerity and recession after it received a €78 billion bailout from the European Union and International Monetary Fund.

PORTUGAL looks set to follow Ireland into the EU/IMF bailout fund after its parliament voted against another round of austerity measures aimed at averting such a bailout.

Portugal’s government could collapse today after opposition parties withdrew their support for another round of austerity policies aimed at averting a financial bailout.