Portuguese coalition parties may clash over austerity

Significance

This reflects the significant risks lying ahead for the government despite the European Council's decision on August 9 to waive fines for Portugal over its excessive budget deficit in 2015.

Impacts

• The European Commission retains the possibility of suspending structural funds for Portugal.
• The decision to waive the fine could undermine the credibility of EU rules in the long term.
• Slower economic growth and the weak banking sector could lead to Portugal being downgraded by rating agencies.