Portugal needs unity, quick return to growth, says new economic czar

LISBON Tue Jul 9, 2013 8:10am EDT

1 of 2. Portuguese opposition and Socialist Party leader Jose Antonio Seguro (L) meets with Portugal's President Anibal Cavaco Silva at Belem president palace in Lisbon July 9, 2013.

Credit: Reuters/Rafael Marchante

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LISBON (Reuters) - Portugal needs political stability to complete its aid program but must also focus on bouncing back quickly from recession, the minister appointed to coordinate economic policy said on Tuesday.

Paulo Portas, who heads junior coalition party CDS-PP, resigned as foreign minister last week, sparking a political crisis that threatened both the government and the 78-billion-euro bailout that Portugal is due to exit next year.

In his first public comments since then, Portas said conditions for political stability were in place, which were "important not only for the government but also for the conclusion of the aid package."

Portas has been a frequent critic of the increasingly unpopular austerity measures forced on Portugal under the terms of the rescue, which have plunged the country into three years of recession and pushed unemployment to record highs near 18 percent.

Prime Minister Prime Minister Pedro Passos Coelho named Portas as deputy prime minister and coordinator of economic policy on Saturday in an effort to break the political deadlock.

Portas, speaking after meeting with President Anibal Cavaco Silva, also said the priority now was to move the country towards a "cycle that boosts the economy, companies, job creation and social cohesion".

The president is meeting with political parties, business leaders and labor groups this week to ensure the crisis can be overcome.

Antonio Jose Seguro, the head of the main opposition Socialists, met the president after Portas and urged the country to hold snap elections. He also said it needed a new bailout program due to the failure of current austerity policies.

"The country is confronted with the necessity to negotiate a new program, a precautionary one or something else," Seguro said.

The Socialists are ahead in opinion polls, though the next national elections are not due until 2015, well after the bailout's scheduled end.

Cavaco Silva has the constitutional power to dissolve parliament and call new elections.

Separately, the head of the country's banking association (APB) said the political crisis needed to be resolved swiftly so a strong government and the country's credibility could be restored, allowing its banks a way back into bond markets where they could raise much-needed financing.

(Reporting By Axel Bugge and Daniel Alvarenga, editing by Shrikesh Laxmidas, John Stonestreet)

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