Europe, Portugal | featured news

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

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.

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.

Portuguese Prime Minister Jose Socrates resigned Wednesday and warned of grave consequences for the country after parliament rejected his government's latest austerity measures aimed at avoiding a bailout.

Portugal was put on notice on Tuesday that its credit rating could be cut and fellow euro zone debtor Spain had to pay more to issue new debt, suggesting the currency bloc's crisis will rage unabated in 2011.

The budget plan for 2011 is aimed at reassuring nervous lenders that the country can avoid a bailout by meeting its deficit-cutting targets.

"I love Portugal. The people are friendly, the weather is great, the landscape is spectacular, the history is rich and the prices are low. It is truly one of Europe's hidden gems," said iReporter David Shaul.