Portugal | featured news

A rare protest by members of Portugal's armed forces against proposed pay and benefit cuts is held in Portugal's capital Lisbon.

A fugitive's 41-year run from the law, which started with the murder of a World War II veteran from New Jersey, has come to an end. The FBI, United States Marshals Service and New Jersey Department of Corrections jointly announced the arrest of George Wright, 68, in Portugal today. Wright had escaped a state prison in 1970, seven years after he was convicted for the murder of Walter Patterson, a service station worker in Wall.

Portugal's prime minister said the economy is expected to shrink 2.3% next year, worse than expected, as global growth slows.

The Portuguese government is planning the country's biggest spending cuts in 50 years, a move it described as "unprecedented".

Portugal will elect a new government on Sunday which will lead the country through a period of deep austerity and recession after it received a 78-billion-euro ($114 billion) bailout from the European Union and IMF.

Euro zone finance ministers are ready to back an EU/IMF bailout of Portugal at a Monday meeting overshadowed by the arrest of International Monetary Fund chief Dominique Strauss-Kahn on sexual assault charges.

Portugal launched talks on Tuesday with European authorities and the IMF on a bailout the caretaker government said it needs to pay the country's dues from June, as politicians jostled ahead of a general election.

Ratings agency Standard & Poor's downgraded two of the euro zone's most troubled member states, citing fears that the pair may have to restructure their debt after 2013.

It would make sense for Portugal to seek aid from the European Union bailout fund, although such a decision will be caught up in domestic politics, European Central Bank Governing Board member Ewald Nowotny said.

European Central Bank policymakers underscored the case for an April rate hike on Thursday as Portugal's political crisis raised the prospect of another spell of reluctant ECB bond market intervention.