Portugal's borrowing costs jump as political tensions rise

Anti-austerity protesters outside the Portuguese parliament in Lisbon Portugal's austerity cuts have sent protesters onto the streets of Lisbon

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Portugal's borrowing costs rose to a seven-month high as political tensions grow over the country's bailout terms.

Yields on 10-year bonds hit an intraday high of 7.9% before easing back, while the Lisbon stock market closed down by 1.6%.

On Friday, the opposition Socialists demanded a renegotiation of Portugal's bailout terms.

Investors fear disagreements over the bailout will weaken Portugal's commitment to economic reform.

Socialist leader Antonio Jose Seguro told parliament: "We have to abandon austerity politics. We have to renegotiate the terms of our adjustment programme. The prime minister has to recognise publicly that his austerity policies have failed."

Divisions over the bailout have already forced Lisbon to request a delay in a review of the bailout by its creditors - initially due to start on Monday - until the end of August or early September.

Nicholas Spiro, managing director at London-based Spiro Sovereign Strategy, said in a research note that there were worries that "the reform drive would grind to a screeching halt".

Portugal has received a 78bn-euro bailout, but critics of the government say the terms of the rescue have cause the biggest economic slump since the 1970s and sent unemployment to record levels of around 18%.

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