Hopes of a budget deal in Portugal collapsed after marathon talks between the minority government of socialist premier Jose Socrates and conservative leaders ended in acrimony.
Finance minister Fernando Texeira dos Santos said failure to agree on budget cuts will "plunge the country into a very deep financial crisis".
Meanwhile, Ireland has announced fiscal retrenchement of €15bn over the next four years, twice the original plan. It is already cutting public wages by 13pc.
John Fitzgerald from Ireland’s Economic and Social Research Institute said there is a risk that austerity tips the economy into a downward spiral, comparing it to an overdose of "chemotherapy" that does more harm than good.
Finance minister Brian Lenihan said the country had no choice. "The cost of borrowing is high and rising, and if we do not act soon to live within our means, people may stop lending to us. We will not fool the markets for an instant if we seek to defer any longer what evidently needs to be done now. The Irish people will have to accept cuts in public expenditures and higher taxes," he said.
Thursday, October 28, 2010
Political upheaval rocks eurozone debt markets - Telegraph