LISBON, Portugal (AP) — Portugal's government was in danger of collapse Tuesday after Foreign Minister Paulo Portas, the leader of the junior party in the center-right coalition government, resigned over the bailed-out country's austerity policies.
Portas' announcement of his departure in a written statement came a day after Finance Minister Vitor Gaspar also quit.
Though Portas did not say whether his party would pull its support from the government, the resignations pitched what for two years had been a stable administration into disarray within the space of 24 hours. It recalled the political strife that has dogged Greece's efforts to recover from its own bailout.
The uncertainty about the government's future looked set to create a further headache for efforts by the 17 countries that share the euro currency to emerge from a financial crisis that has tormented them for more than three years, as austerity meets growing resistance from politicians, trade unions and business leaders.
Austerity is widely blamed for driving the jobless rate in Portugal to 17.6 percent and for what is forecast to be a third straight year of recession in 2013.
Portugal needed a 78 billion euros ($102 billion) bailout two years ago after a decade of weak growth and mounting debt pushed it to the verge of bankruptcy.
Portugal is now locked into a deficit-reducing program demanded by its bailout creditors — the International Monetary Fund and other EU countries. If Portugal doesn't abide by the terms of the bailout agreement, the creditors can halt disbursements of the rescue loans.
Portugal's government debt stands at almost 124 percent of gross domestic product, the third-highest in the EU after Greece and Italy. Its deficit last year was 6.4 percent — above the 5 percent target but below the 2010 figure of 10.1 percent.
Portas had repeatedly spoken out against former finance minister Gaspar's strategy of public sector pay and pension cuts and tax hikes. But Gaspar had the support of prime Minister Pedro Passos Coelho, head of the Social Democratic Party, the coalition's senior member.
Portas, who has demanded more measures to stimulate economic growth, said he disagreed with Passos Coelho's choice of Maria Luis Albuquerque to replace Gaspar. Albuquerque has endorsed the austerity which Portas wants eased.
"I respect (Albuquerque's appointment) but disagree with it," Portas said in the statement sent to reporters. He said that remaining in the government would be "politically unsustainable."
Portas did not say whether he would take his Popular Party out of the government — a step which would leave it without a parliamentary majority to push through its policies.
Passos Coelho's office said the prime minister would make a live television address to the nation later in the evening.
Portas's statement came out around 30 minutes before Albuquerque, the new finance minister, was sworn into office in a ceremony at the presidential palace and appeared to cause deep unease among Cabinet members attending the occasion, including Portas in his final official event. They declined to comment to reporters.
By Lionel Laurent
PARIS (Reuters) - A former HSBC employee wanted in Switzerland for leaking the details of tens of thousands of bank accounts gave evidence on Tuesday to French lawmakers trying to tighten rules against tax evasion.
Herve Falciani spent four hours describing ways he said the bank helped its clients sidestep taxes using various loopholes and exemptions under national laws, according to two Socialist deputies who met with him in closed session.
"Mr Falciani told us some extremely interesting things," said one of the deputies, Yann Galut. "He indicated to us ... various examples of dysfunction that we will now examine."
Galut and fellow National Assembly deputy Christian Eckert said they would use Falciani's information to help draft a new law to fight tax evasion.
"He said there were entire (bank) departments ... dedicated to staying one step ahead of the law and that we were not well-equipped enough," said Galut, praising Falciani as a whistleblower who revealed tax evasion on an "industrial" scale.
An HSBC spokesman said the bank could not comment on the hearing itself, as it had not been officially informed.
"In general, Mr. Falciani has made many statements but the only proven fact remains that he stole confidential data from the bank in 2008, a criminal offence under Swiss law," the spokesman said. "HSBC complies with the law in all the territories in which it operates."
Governments are cracking down on tax avoidance in the wake of the financial crisis, raising the pressure on countries such as Switzerland whose laws on client confidentiality make it easier for foreigners to hide wealth from the tax man.
French President Francois Hollande is under particular pressure to act after his budget minister resigned over an undeclared Swiss bank account in March.
Falciani caused a furor in 2010 when bank client data ended up in the hands of tax authorities in France, Italy, Spain and other European countries that later used it to try to recover billions of euros in lost taxes.
HSBC and Switzerland's UBS are now under investigation in France over whether they unlawfully sold products designed to avoid tax.
Falciani was in France after taking refuge in Spain from Swiss authorities seeking his extradition. He avoided being sent back to Switzerland when Spanish authorities ruled that the charges he faced were not considered crimes under Spanish law.
Galut said Falciani was cooperating with the French authorities and France's judiciary would go "right to the end" in its probe of HSBC.
Falciani, who has Italian and French citizenship, only gave a brief statement to reporters as he left the National Assembly building.
"The veil is only just beginning to lift," he said, sporting a goatee beard and patterned shirt. He said he had faced threats since leaking the bank account data, without elaborating.
(Reporting by Lionel Laurent; editing by Christian Plumb and Tom Pfeiffer)
NEW YORK (AP) — Good news about car sales, home prices and manufacturing led the stock market higher in light trading Tuesday.
The market was quiet ahead of the July 4th holiday. But traders weighed a number of positive reports, including Ford's best June sales since 2006. Home prices climbed to a seven-year high and factory orders rose.
U.S. stocks have begun to recover from a slump last month after Federal Reserve Chairman Ben Bernanke said the central bank was considering easing its stimulus measures later this year, if the economy keeps getting better. The central bank is buying $85 billion a month in bonds to keep interest rates low and encourage borrowing.
The Dow Jones rose 57 points, or 0.4 percent, to 15,032 as of 11:31 a.m. Eastern Daylight Time. The Standard & Poor's 500 index gained seven points, or 0.4 percent, to 1,622. The Nasdaq composite added 12 points, or 0.4 percent, to 3,448.
Nine of the 10 industry groups in the S&P 500 rose, led by phone companies.
Ford rose 26 cents, or 1.7 percent, to $16.01, lifting the stock to its highest level since February 2011.
Factory orders rose in May, helped by a third straight month of stronger business investment. Orders rose 2.1 percent and April's increase was revised higher to 1.3 percent from 1 percent, the Commerce Department said.
Investors and traders are also turning their focus to corporate earnings, which begin in earnest next week. While corporate profits have reached record levels, most of the gains have come from cutting costs rather than increasing sales.
"We're in the middle of a transition," said Chris Wolfe, chief investment officer at Merrill Lynch Private Banking and Investment Group. "You would expect to see, over the balance of this year and going into next year, somewhat stronger macro-economic data that translates directly into stronger corporate revenue growth."
Alcoa, the first company in the Dow to report its earnings, will release its second-quarter earnings report after the market closes July 8.
In government bond trading, the yield on the 10-year Treasury note was unchanged at 2.48 percent on Monday. The yield has stabilized after surging as high as 2.66 percent last week, on concern that the Fed was set to stop buying bonds. As of May 3, the yield
In commodities trading the price of oil rose 85 cents, or 0.9 percent, $98.85 a barrel. Gold fell $7, or 0.6 percent, to $1,248.90 an ounce. The dollar against the euro and the Japanese yen.
Among stocks making big moves: — Zynga jumped 25 cents, or 8.1 percent, to $3.33 after the troubled maker of "FarmVille" and other online games said its CEO Mark Pincus would step aside. The company's stock is down almost 70 percent since its 2011 initial public offering at $10 per share.
— Achillion Pharmaceuticals fell $1.98, or 23.8 percent, to $6.37 after the drug developer said regulators Monday placed a hold on an early-stage study involving its potential hepatitis C treatment.
— DaVita HealthCare Partners fell $4.29, or 3.5 percent, to $116.90, after the government proposed cutting the rates of Medicare payments to dialysis service providers.