Portugal delivered a pleasant surprise on Wednesday, posting the euro zone's strongest growth in the second quarter, but its political fragility is still concerning analysts.
The peripheral euro zone economy exited recession after two and a half years of contraction in the second quarter of 2013, with a better-than-expected 1.1 percent jump in GDP (gross domestic product) growth. This was fueled in part by improved tourism revenues.
The growth was hailed by the government as vindication of its austerity-based policies – and that government needs a bit of good news after a high-profile squabble last month.
(Read more: Why Portugal has to save itself)
A crisis in the coalition government began at the start of July with the resignations of Finance Minister Vitor Gaspar and Foreign Minister Paulo Portas. Portugal's vulnerability in the bond markets was demonstrated by a spike in 10-year yields to over 8 percent. While Portas has since returned to government, and the coalition seems to have been patched up, there are worries that this is a band-aid rather than a plaster cast.
An election is expected next year, and the opposition Socialists would probably win, according to Robert Parker, senior adviser at Credit Suisse.