When the Portuguese Parliament failed to pass an austerity bill on March 23, the country’s Prime Minister, Jose Socrates, resigned. That move leaves Portugal leaderless for at least two months while facing a significant financial crisis: it must refinance nearly $13 billion of short-term debt by June. Investors have already pushed interest rates on Portugal’s sovereign 10-year debt to almost 8 percent, while credit-rating agencies Fitch and Standard & Poor’s both downgraded that debt’s quality on March 24.
The European Union (EU) has already bailed out Greece and Ireland, and a top official announced that the EU has the resources to rescue Portugal, if necessary. The bailout would cost an estimated $60 billion to $80 billion.