Portugal's prime minister has faced a wave of street protests over austerity
Portugal's prime minister says he has negotiated a "formula" to keep his coalition government intact after two resignations plunged it into crisis.
The political uncertainty sent the interest rate on Portuguese 10-year bonds soaring above 8%, but on Friday the rate fell back to 6.8%.
PM Pedro Passos Coelho says his centre-right coalition partner has pledged to maintain its crucial support.
The government is struggling to fulfil tough bailout conditions.
Portugal received a bailout worth more than 78bn euros ($102bn; £67bn) in May 2011, on the condition it implemented austerity measures.
The latest uncertainty rekindled market anxiety that Portugal might need further international assistance and put new pressure on the eurozone.
On Thursday night Mr Passos Coelho, leader of the Social Democratic Party, said a "formula [had] been found to maintain the government's stability". He was speaking after crisis talks with President Anibal Cavaco Silva. He did not explain what that formula meant.
Earlier he held a series of meetings with Paulo Portas of the centre-right Popular Party (CDS-PP), who resigned as foreign minister on Tuesday.
Mr Passos Coelho, who refused to accept Mr Portas's resignation, said the latter had told him "it was a personal decision and does not involve the support of the CDS-PP for the government".
'No contagion'President Cavaco Silva is due to begin talks with the parties on Monday.
Germany's Finance Minister, Wolfgang Schaeuble, said he did not expect contagion to spread from Portugal to other eurozone countries.
"I think the euro is now viewed on the world's financial markets as so stable that domestic political situations in individual countries... don't mean a crisis for the stability of the euro as a whole,'' he said in Berlin.
European Central Bank president Mario Draghi praised the Portuguese government's efforts in the debt crisis.
"Certainly, it's been a painful route - and the results that have been achieved have been quite significant, remarkable, if not outstanding," he said.
The crisis began on Monday with the resignation of Finance Minister Vitor Gaspar, who for two years had overseen the unpopular austerity policies.
Portugal has been in recession for two years and the economy is expected to contract by 2.3% this year.
Source: BBC News - Business http://www.bbc.co.uk/news/world-europe-23194657#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa
