President calls election in Portugal as bailout doubt remains

President Aníbal Cavaco Silva announced late on Thursday that a June 5 snap election would be held after he had taken the decision to accept Prime Minister José Sócrates' resignation. Political uncertainty is seemingly pushing the country ever closer to a European Union bailout, similar to those needed by Greece and Ireland.

But Sócrates, who stepped down after the opposition-dominated parliament rejected his latest austerity plan on March 23 and who will remain as a caretaker premier, has said he will resist a bailout.

President Cavaco Silva called the early election after all political parties told him they wanted the people to decide what government they want.

While the political parties are getting ready for the election, Portugal's main risk lies in the debt markets. Portugal's bond yields are hitting euro lifetime highs on a daily basis, pushed up by the political uncertainty and the ensuing downgrades by credit rating agencies.

The country has to repay over four billion euros in maturing bonds on April 15, as well as coupons on some debt, and is likely to need an estimated total of six billion euros in April.

In another worrying development, Portugal on Thursday revised upward its estimate for the country's public deficit last year, causing the government to miss its target as Finance Minister Fernando Texeira dos Santos said the Socialist government lacked the "legitimacy" to seek external aid in the wake of the resignation of Prime Minister Sócrates.

Following a query from the European Union's statistics office, Eurostat, Portugal's own statistics body revised its estimate for the budget shortfall to 8.6 percent of GDP. The government had set itself a target of 7.3 percent.