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Portugal jobless rate down for 1st time in 2 years

Wednesday - 8/7/2013, 10:10am  ET

BARRY HATTON
Associated Press

LISBON, Portugal (AP) -- Portugal's unemployment rate has fallen for the first time in two years, the bailed-out country's statistics agency said Wednesday, but the embattled coalition government got little respite from its recent pressure as one of its junior officials quit in an ongoing scandal.

The National Statistics Institute said preliminary estimates show the jobless rate in the second quarter dropped to 16.4 percent from a record 17.7 percent in the first quarter. A revised and final estimate is due later this month.

The agency didn't provide reasons for the fall but the summer vacation season often brings more job openings. The biggest drop among regions was in the Algarve, one of Europe's top holiday destinations, where the fall was 3.6 percentage points.

Portugal has been in recession for the last 10 quarters. It needed a 78 billion euros ($104 billion) rescue in 2011 after a decade of weak growth and mounting debts pushed it close to bankruptcy.

The drop in the jobless rate was welcome news for Portugal's coalition government, which almost collapsed last month when the finance minister and foreign minister both resigned in the space of 48 hours. The two coalition partners patched up their differences with a reshuffle but tensions remain.

The two ministers quit in a disagreement over austerity measures which are being enacted in return for the bailout and which many blame for worsening the recession. The government expects the economy to shrink 2.3 percent this year after a 3.2 percent contraction in 2012.

However, the jobs improvement came on the same day that another member of the government's financial team quit amid an ongoing scandal over derivatives contracts signed by state companies in recent years.

The contracts, designed to hedge against interest rates rises on loans, proved costly after interest rates fell, forcing state companies to pay out hundreds of millions of euros to international banks and worsening the country's debt problems. The derivatives contracts were not illegal, but opposition parties say they were ruinous.

Secretary of state for the treasury Joaquim Pais Jorge, who started work just over a month ago and reports to new finance minister Maria Luis Albuquerque, announced his resignation after media reports said the foreign bank where he was a Lisbon branch director tried to sell the contracts to a previous government, in 2005.

Though Pais Jorge has said he wasn't directly involved in the effort to sell derivatives, he has been caught up in public anger at financial dealings seen as one of the causes of the crisis.

Pais Jorge did not admit to any wrongdoing in his resignation letter emailed to reporters. He said recent media attention had been "intolerable," claiming his words had been distorted, and complained about a political campaign against him.

Albuquerque, the finance minister, has also been questioned by a parliamentary inquiry about her role in obtaining the hedging contracts in her previous job as financial director at state rail infrastructure company Refer.


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