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Portugal’s ruling party failed to pass fresh austerity measures in parliament, and this triggered the resignation of Prime Minister Jose Socrates.  Seeking a bailout from the EU is closer than ever. EUR/USD drops.

The prime minster is set to meet the president and tender his resignation this evening. Here’s are some  details:

Socrates is planning to meet with Silva at 19h00 GMT/1500 EDT, and it is widely anticipated that he will tender his resignation in that meeting if the parliamentary vote goes as is widely expected. Socrates is scheduled to address the nation at 20h00 GMT/1600 EDT this evening.

Update; The Portuguese parliament rejected the plan. EUR/USD at 1.4100.

Passing these new austerity measures wass necessary to resume confidence in Portugal’s finances. Portuguese yields on 10 year note are around 7.50% for a long time, higher than Irish yields when it was forced to take a bailout from the EU / IMF fund. Also yields on 5 year notes have passed the 8% mark – definitely unsustainable.

It will be very hard for Portugal to raise money now.  This all happens one day before the EU Summit that was supposed to provide new solutions for the debt crisis. What will the European leaders do now?

For more on the situation in Portugal and the new troubles in Ireland that got a bailout, see the article EUR/USD Loses Support as Debt Crisis Widens.

EUR/USD now falls to lows at 1.4114, at today’s lows but still above significant support at 1.4030.

For more technical levels and events, see the EURUSD Forecast.

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