{EOP}Portuguese PM resigns amid Financial collapse

Portugal plummeted into fresh crisis Thursday after the prime minister quit following a showdown with parliament over his new austerity plan, increasing the likelihood Lisbon will seek a financial bailout. PM Jose Socrates tendered his resignation late Wednesday, saying he could not govern without support after all five opposition parties voted against his minority government's latest spending cuts and tax hikes. The austerity plan - the government's fourth in a year - was aimed at avoiding the need for an EU-IMF bailout to help Lisbon meet debt repayment obligations, a package similar to those granted fellow eurozone members Greece and Ireland last year. "This crisis will have very serious consequences in terms of the confidence Portugal needs to enjoy with institutions and financial markets", Socrates said after presenting his resignation to President Anibal Cavaco Silva.

Portuguese PM Jose Socrates

The events in Portugal threaten to derail a two-day European Union summit that gets underway Thursday in Brussels that had been expected to finalise the bloc's response to a year-long eurozone debt crisis. German Zionist pro IMF Chancellor Angela Merkel said Thursday she regretted that parliament had rejected Socrates' austerity plan, describing it as "correct and courageous". "Now what?" said the headline on the front page of business daily Diario Economico, summing up the national mood. The Portuguese president will hold meetings with all political parties on Friday and the government would retain full powers at least until then, the president's office said in a statement. That leaves Socrates, in office since 2005, and his Socialist government in place with full powers for the duration of the EU summit although as an outgoing leader his authority is severely damaged. The president can now invite parties with representation in parliament to form a coalition government or, in the more likely scenario, he can dissolve parliament and call snap elections.