Portugal's PM names new deputy in deal to avert coalition collapse

Portugal's prime minister said Saturday that foreign minister Paolo Portas, whose resignation this week sparked a political crisis, will remain in government and get a bigger role under a deal to hold the ruling coalition together. "I have proposed that Paolo Portas take on the post of deputy prime minister with the responsibility of coordinating economic policies and relations with the 'troika' of Portugal's creditors," said Pedro Passos Coelho in a press conference alongside Portas. Portas, who also leads the coalition's junior partner, the small conservative CDS-PP party, had resigned on Tuesday over disagreements with the coalition's economic policies. His announcement had come just a day after finance minister Vitor Gaspar said he was quitting, throwing the country into a crisis. The shock resignations raised the spectre of a fresh wave of instability in the eurozone's debt-laden periphery, and sent Portugal's 10-year borrowing rates to critical levels. At the heart of the dispute are the painful economic reforms pushed by Passos Coelho's coalition in exchange for desperately needed loans from the "troika" of international creditors -- the European Union, the European Central Bank and the International Monetary Fund. Portas, who wants a change in economic policy, objected to the premier's choice of new finance minister, Treasury Secretary Maria Luis Albuquerque, who was expected to pursue further austerity in defiance of mass protests. Under details of the deal announced Saturday, Albuquerque was confirmed to the post. Passos Coelho said the agreement with Portas was "solid" and would help "guarantee that the international engagements of Portugal will be respected". "It is our obligation ... to ensure stability, which is indispensable to overcome the fragile political situation that we are experiencing," he said. The political deal would still require the support of President Anibal Cavaco Silva, who has the power to dissolve parliament and call for elections. Passos Coelho said the president would announce a cabinet reshuffle in the coming days. Unions are piling on the pressure with hundreds of protesters answering their call, in a demonstration Saturday demanding the government's resignation. "The situation has become unbearable. We want a real change, not musical chairs," said unemployed 38-year-old Edite Chainho, who was holding a banner reading "Government out". The austerity measures including layoffs and higher social security contributions have thrown Portugal into a deeper recession with higher unemployment than had been expected, sparking mass protests and strikes. The government expects the economy to contract by 2.3 percent by the end of the year, while the unemployment rate has soared to a record 18.2 percent. Despite growing opposition to the reforms, the government is under pressure to present another 4.7 million euros in spending cuts to the troika when its auditors visit Portugal on July 15. According to a survey published Saturday by the bi-weekly Expresso, 37.2 percent of those surveyed said they favour early elections, while 45.1 percent wanted the status quo or a new government headed by the president.