July 11 - Portugal's political crisis deepens after the president rejects a plan to heal a government rift and critics accuse him of igniting a ''time bomb'' by calling for early elections next year. Kirsty Basset reports.
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Portugal's political crisis has taken a turn for the worse - thanks to its own President.
Anibal Cavaco Silva has rejected a cabinet reshuffle - brought about by the resignation of two ministers - saying all parties must band together for the greater good.
(SOUNDBITE) (Portuguese) PORTUGAL'S PRESIDENT, ANIBAL CAVACO SILVA, SAYING:
"The country urgently needs a medium-term deal between the parties that subscribe to the memorandum of understanding with the EU and IMF. That's the path we should pursue together. I will support which truly represents a national salvation commitment."
His unexpected actions have raised the prospect of early elections, sending stocks down and bond yields up.
It's also increased doubts about Portugal's return to the markets in 2014.
Will Hobbs is from Barclays.
(SOUNDBITE)(English) WILL HOBBS, VP RESEARCH, ECONOMICS AND STRATEGY AT BARCLAYS SAYING:
"You wouldn't want to say with too much certainty whether they're going to need a restructuring or not. You would have thought the central powers in the euro zone would be reasonably lenient with Portugal. It seems like Portugal has been to date one of the poster children for the reform programmes."
The President's move suggests he has little faith in the current regime, despite what some voters think.
(SOUNDBITE) (Portuguese) LISBON RESIDENT, JOAO ALVES, SAYING:
"Until the troika leaves I think the government should continue, since the opposition party doesn't want to form a coalition, it will have to be this way."
Portugal's bailout programme is due to be assessed by the troika next week.
With the country experiencing its worst economic slump for 40 years some have accused Silva of igniting a political "time bomb."
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