Portugal political crisis likely to deepen, bond yields soar

LISBON (REUTERS) - Portuguese local media said two more government ministers were preparing to tender their resignation on Wednesday, deepening the turmoil that could derail Lisbon's exit from an international bailout.

Reports said Agriculture Minister Assuncao Cristas and Social Security Minister Pedro Mota Soares will follow their CDS-PP party leader Paulo Portas who tendered his resignation on Tuesday.

Prime Minister Pedro Passos Coelho told the nation late on Tuesday that he did not accept Portas' resignation and would continue to head the government to ensure political stability and work to overcome the stalemate.

However, with no solution imminent, Portugal's bond prices slumped further. The returns investors demand to hold 10-year bonds surged to above 7.5 percent for the first time since November.

Portugal's PSI 20 stock index slumped 6 percent, led by sharp losses of over 10 percent in banks' shares.

Coelho's decision puts the responsibility for the government's survival squarely on the shoulders of Portas, who now has to decide whether to stay in his post or pull his rightist CDS-PP party out of the coalition. Without the CDS-PP, the centre-right government would lose its majority.

The party's top brass will hold a meeting later on Wednesday, after which Portas may make a statement, according to Diario de Noticias newspaper.