1) The negotiations between Passos Coelho, the leader of the main opposition party, PSD, and José Sócrates, the Prime Minister, did not really break down. They were simply interrupted. I hope. The two men are clashing in many issues and one of them is certainly their character - I don't need to have lunch with Sócrates to know that I wouldn’t buy a second hand car from him.
2) The Prime Minister wants Coelho to sign a blank cheque before the Budget goes to Parliament, in a fortnight’s time, and of course the latter does not want to do that: we may guess that he wants his MPs (unfortunately he is not one of them because the former PSD leader blocked his election) to discuss the budget, loud and clear, so that he does not loose his electorate.
3) Passos Coelho should not follow the same people in his party that proposed the "revisão constitucional" which was an ideological, badly designed and unnecessary move. He does not need ideology but pragmatism instead.
4) Cavaco Silva, the President, will ultimately help Passos to get out well from this episode.
5) Passos needs to get the Budget passed and to be able to say that he did what was best for the country.
6)It may be necessary to raise taxes in order to fulfil the deficit target for 2011 agreed with Brussels.
7) Contrarily to common sense widely spread in Portugal and abroad, this country has a good record in keeping its international financial obligations and that tradition is well embedded in both the Socialist and the Social Democratic parties.
8) People are not protesting on the streets, contrarily to Greece, France or even Spain, which somehow prouves the point above.
9) Since Cavaco Silva´s reforms, back in the 1990s, Portuguese governments have at their disposal enough tools to cut expenditure and/or raise taxes, as they wish (tools that Mário Soares, for instance, did not have in the early 1980s).
10) Let's see what happens next.