Outside the site of the summit, police used water cannons and pepper spray to keep demonstrators angry over plans for tough economic measures away.
Police said close to 20,000 workers marched against an economic reform package unions say is far too business-friendly, chanting, blowing whistles and blocking key roads in central Brussels.
The protest cause traffic gridlock in the part of the Belgian capital that houses EU institutions.
A dozen police officers were injured in scuffles.
The summit was going to be the day for EU leaders to give their final approval to the overhaul of their crisis strategy, including closer economic cooperation and the size and power of the region’s bailout funds. Instead, the event was overwhelmed by discussion of the futures of Portugal and Ireland.
The defeat of Portugal’s minority government over planned austerity measures puts one of Europe’s must financially troubled countries into political limbo just as it faces huge debt repayment deadlines.
Pedro Passos Coelho, the leader of Portugal’s main opposition party and the most likely candidate to become its next prime minister, said it was “impossible” to tell whether the country could avoid an international bailout, like the ones taken by Greece and Ireland.
He said he didn’t have complete information about Portugal’s finances, but emphasized that the country needed “a stronger government, more committed to reducing the public deficit and controlling debt levels.” Passos Coelho’s center-right Social Democratic Party and other opposition parties Wednesday night refused to endorse Prime Minister Jose Socrates’ spending cuts and tax increases, triggering his resignation.
Passos Coelho was meeting other conservative EU politicians at a pre-summit meeting just outside Brussels, while Socrates will represent his country at the actual summit later Thursday and Friday. However, Passos Coelho said that Socrates would not have a mandate to negotiate a bailout on behalf of his country.
Most analysts believe that an international rescue for Portugal is only a matter of time, but Swedish Prime Minister Fredrik Reinfeldt stressed that the EU had all the necessary tools in place to aid the country should it need help.
Other EU leaders said they regretted Socrates’ defeat over austerity measures.
“Portugal had presented a very courageous reform program for the years ‘11, ‘12 and ‘13,” said German Chancellor Angela Merkel. “I think it will depend very much on everyone who speaks for Portugal feeling committed to the goals of that program. That is not only important for Portugal but also for the entire eurozone.”
Jean-Claude Juncker, the prime minister of Luxembourg, said EU leaders would hold talks with both Passos Coelho and Socrates to get a clear idea of the situation in Portugal.
The political crisis in Portugal comes at a bad time for the EU, not only because of the debt repayments the cash-strapped country faces in the coming months, but also because it takes the shine off the region’s new crisis strategy, which was due to be signed off at the summit.
Many analysts fear that the trouble in Portugal could heighten market concern again about other vulnerable countries in the 17-nation eurozone, most notably Spain, though the country’s markets were well-supported on Thursday.
At the same time, a new government in Ireland is also creating jitters, threatening to make senior bondholders take losses if stress tests due out next week reveal big capital holes in the country’s banks. Irish Prime Minister Enda Kenny said he would not try to reach any new deals on his country’s painful bailout with other eurozone leaders until he knows the result of the stress tests.
The stress tests will give a clearer picture of the state of the banks and the ability of the Irish government to continue shouldering their losses — as it has been since the beginning of the crisis.
But they will also show other eurozone governments, whose banks were prolific lenders to their Irish counterparts, how much they are involved in the problem.
If the Irish force losses on private bank bondholders that could cause huge trouble for banks in Germany, the UK and France.
Gay Mitchell, a European Parliament member from Ireland’s ruling Fine Gael party, said the idea of making bondholders share part of the blame was not a threat but a cry for help.
“We have a problem with recapitalization of our banks. We’re not threatening anybody, we’re saying please help us out on this. ... Ireland is not capable on its own of doing this,” Mitchell told the Associates Press. “We do need support from EU institutions on bank recapitalizations.”
The EU and the European Central Bank have so far ruled out letting big banks fail outright, fearing that it would cause panic on financial markets similar to what happened after the collapse of Lehman Brothers in 2008.
