Portugal government battles for survival PORTUGAL'S leaders are scrambling to save their coalition government after being torpedoed by top resignations over the austerity policies squeezing their bailed-out nation. Financial markets rallied on Thursday after Prime Minister Pedro Passos Coelho assured his European partners that he could ride out the storm which erupted after his finance and foreign ministers said they were quitting. "I am convinced that it will be possible to find the necessary conditions to ensure the stability of the government," he told reporters in Berlin at a top-level meeting Wednesday on youth unemployment. The Portuguese stock market's PSI-20 index showed a gain of 3.04 per cent to 5,395.48 points in morning trade on Thursday, after plunging 5.31 per cent the previous day. Pressure on the bond market eased, too, with the Portuguese benchmark 10-year government bond yield sliding to 7.216 per cent, having spiked to 8.106 per cent Wednesday. Markets had plunged after Foreign Minister Paulo Portas, who is also leader of the junior partner in the governing coalition, the small conservative CDS-PP party, announced he was resigning on Tuesday. The news came a day after the shock departure of finance minister Vitor Gaspar. But the prime minister, desperate to hold together the coalition led by his Social Democratic Party, has so far refused to accept the resignation of his foreign minister and the two have since been in talks. The prospect of a deal emerged when the CDS-PP leadership asked Portas to meet with the premier to find "a viable solution for the government of Portugal." A first round of talks on Wednesday evening between the prime minister and his foreign minister were described as "very constructive" by the premier's office. They were holding a second round on Thursday morning. Passos Coelho was reportedly hoping to be able to present a solution for the government to President Anibal Cavaco Silva at a meeting scheduled for 1600 GMT (02:00 AEST)