Portuguese parties want early election in May

Portugal's political leaders urged the president to call a snap election in late May or early June after the Socialist prime minister's resignation, rejecting the option of a coalition cabinet.

The crisis could force Portugal to request a bailout from the European Union and International Monetary Fund after months of desperate struggle to avoid one, and make it the third euro zone country to seek aid after Greece and Ireland.

Prime Minister Jose Socrates' resignation was sparked by parliament's rejection on Wednesday of his minority government's austerity measures aimed at averting a bailout.

Pedro Passos Coelho, the leader of the main opposition Social Democrats (PSD) party that leads opinion polls, said he had suggested a May 29 election date during talks with President Anibal Cavaco Silva -- the earliest date possible by law.

"I told the president that in our opinion the way to overcome the political crisis... is to call an early election. We are convinced the election has to take place as soon as possible and we proposed May 29," he told reporters.

Earlier, other opposition party leaders suggested a May 29 or June 5 election. None mentioned a coalition -- an option the president has to consider but which analysts deem extremely unlikely.

The political crisis prompted Standard & Poor's and Fitch to downgrade Portugal's credit ratings and pushed Portuguese debt yields to record highs.

S&P's two-notch cut, which came with a warning it could downgrade the debt-laden state further as soon as next week, depending on the final shape of the euro zone bailout fund, hit the euro. S&P now rates Portugal lower than Ireland.

European leaders agreed a new package of anti-crisis measures at a two-day summit, but delayed increasing their rescue fund until June and acknowledged they faced new threats from the Portuguese political crisis.

A sell-off in Portuguese bonds pushed the yield on its 10-year benchmark above 8 percent, a euro lifetime high and a cost of funding that is widely viewed as unsustainable.

The spread between Portuguese debt and safer German Bunds widened 13 basis points to 474 bps, while the cost of insuring its debt against default also rose.