Euro Falls as Portuguese Government Rejects Latest Austerity Package

Just as the US markets closed at 20:00gmt, news crossed the wires that the Portuguese government had rejected the latest austerity package increasing pressure on the countries PM to resign. The breaking news from Lisbon sent the euro to its lowest levels of the day as the FXE chart below highlights.

(the FXE is an ETF which tracks the euro against a basket of other currencies)

Source: http://www.ft.com/home/uk

Also Jose Socrates said prior to the vote he would resign if the plan fails to clear parliament, this further escalates both political and economic crisis within the peripheral European nation. Furthermore the resignation of the Portuguese PM would force a snap election. 

All opposition parties voted against the austerity measures as part of the stability and growth program for 2011-2014. Only the ruling socialist party, which has 97 out of 230 seats in parliament voted in favour of the package.

Portugal's finance minister warned, prior to the vote that his country might seek a bailout. Additionally a senior FX trader at ETX capital said “It was only a matter of time before it came to this. The sovereign debt issue had gone quiet over the last couple of months and certainly the last few weeks ... but it was always going to rear its ugly head again,”

As a consequence of this vote, Portugal now the faces the an uncertain economic future as a Eurozone bailout now looms in the foreground. 

The European Financial Stability Fund currently stands at 440bn euros ($705bn)