Portugal's prime minister
faces a day of talks aimed at shoring up his coalition, reeling after
the resignations of two senior ministers.
Pedro Passos Coelho is anxious to keep his conservative
partners on board, to defuse a political crisis and avoid the turmoil of
an early election.His coalition is under intense pressure to stick to the tough austerity targets dictated by Portugal's bailout.
But the interest rate on Portuguese bonds has dropped back below 8%.
Yields on 10-year Portuguese bonds fell to 7.26% on Thursday. The sharp spike - topping 8% on Wednesday - had revived market jitters about instability in the eurozone.
President Anibal Cavaco Silva will meet Mr Passos Coelho and other political leaders later on Thursday. The president is known to be keen to avoid calling early elections, the BBC's Alison Roberts reports from Lisbon.
Left-wing opposition parties are demanding early elections, and opinion polls suggest the ruling conservatives would do badly. The Communist Party held a big anti-government rally in central Lisbon on Wednesday.
Political storm The crisis began on Monday with the resignation of Finance Minister Vitor Gaspar, who for two years had overseen the unpopular austerity policies.
The prime minister's choice to replace him, the former treasury secretary Maria Luis Albuquerque, is seen as just as wedded to austerity, says our Lisbon correspondent.
It was that fact that the foreign minister and junior coalition leader, Paulo Portas, cited in tendering his resignation on Tuesday.
Our correspondent says Portugal's president is clearly putting pressure on the coalition to patch things up, given the very adverse reaction to the crisis in the markets.
The European Commission President, Jose Manuel Barroso, said he was following the situation "with concern".
Portugal received a bailout worth more than 78bn euros ($102bn; £67bn) in May 2011, on the condition it implemented austerity measures.
Demonstrators have taken to the streets in recent days to protest against planned austerity reforms.
Portugal has been in recession for two years and the economy is expected to contract by 2.3% this year.