14 Jul 2013

Cost of borrowing rising for Portugal

6:24 am on 14 July 2013

Portugal's borrowing costs rose to their highest for seven months as political tensions grew on Friday over the terms of the bailout.

Yields on 10-year bonds reached 7.9% before easing, while the Lisbon stock market closed down by 1.6%.

On Friday, an opposition party demanded a renegotiation of Portugal's bailout terms.

Investors fear disagreements over the bailout will weaken Portugal's commitment to economic reform.

"We have to abandon austerity politics,'' Socialist leader Antonio Jose Seguro told parliament.

''We have to renegotiate the terms of our adjustment programme. The prime minister has to recognise publicly that his austerity policies have failed."

Divisions over the bailout have already forced Lisbon to request a delay in a review of the bailout by its creditors until the end of August or early September. The BBC reports it was initially due to start on Monday.

Portugal has received a bailout worth 78 billion euros, but critics of the government say the terms of the rescue have cause the biggest economic slump since the 1970s.

Unemployment is at record levels of around 18%.