Portugal’s Parliament passed a controversial bill on regional finances today that could increase debt deficit. In a vote lawmakers cast 127 votes in favor of the law and 87 voted against in the 230-seat parliament, this despite government warnings that the move will send a wrong signal to the markets, already concerned by uncertainty over Portugal's public finances.
The minority socialist group was trying block the bill saying it gives the majority the power to raise the budgets with wasteful measures. Parliament begins budget discussion next Wednesday and it seems political uncertainty is not what the market needs.
European markets have been hit hard with debt scares in both Portugal and Greece, watching the Euro trade as low as it has in months. Political unrest and unfavorable news is not what the markets want to hear.
Leaders of the group who support the bill say that budget deficit shouldn’t rise near what the opposition is saying. Pressure has been put on Portugal to further deficit cuts into 2011-2013, the government has responded by pledging to the European Union to cut deficit below 3% by 2013.
It will be interesting to see how the budget turns out; it will inevitably affect how the Portuguese markets and European markets as a whole move. Portuguese stocks continued their slide today down another 1.5% around midday, this following a disastrous 5% loss on Thursday