The implication of top political and social personalities in a huge paedophile network with the apparent complicity of the authorities has shaken the very foundations of Portuguese democracy.
Doubts are now being cast even on the impartiality of judges handling the case.
The credibility of decision-makers is being undermined just as they face the challenge of a deepening economic recession.
The discovery of a paedophile network in the Casa Pia care homes for children is regarded as Portugal's most-serious crisis in almost 30 years of democracy.
Former Casa Pia employee Carlos Silvino is believed to have procured boys for wealthy and influential paedophiles for two decades.
More than 100 children may have been raped or pressured into sexual activities with adults.
Charges have been formally raised against 10 suspects including former labour minister Paulo Pedroso, a Socialist whizz kid and close friend of party leader Eduardo Ferro Rodrigues.
Other suspects include two television personalities, one of the country's most prominent ambassadors, a high-society doctor and a well-known lawyer.
Orgies at a villa
Pedroso was released after being detained for four months.
He has resigned from most of his political posts to prepare his defence against what all of the accused describe as unfounded slander.
Portugal has been stunned by increasing evidence that members of the country's elite abused children staying at one of its oldest, most respected public institutions.
The paedophiles targeted the most defenceless children, such as orphans and deaf-and-dumb young boys.
Many of the orgies apparently took place at ambassador Jorge Ritto's villa near Lisbon.
Reports of the abuse surfaced in the 1980s, but investigations were dropped and documents disappeared in what appears to have been an orchestrated cover-up.
Former secretary of state for families, Teresa Costa Macedo, said she received death threats after telling police.
'Struck into the heart of our democracy'
In the most-recent development, investigating magistrates are suspected of leaking to the press anonymous letters seeking to implicate President Jorge Sampaio and European Commissioner Antonio Vitorino, who are both Socialists.
The public prosecutor's office said neither politician had links with the case.
"The scandal struck into the heart of our democracy," the daily Publico wrote, while columnist Edgar Correia called Portugal "a sick country".
If the paedophilia suspicions are confirmed, the self-esteem of a nation known for its melancholia - "saudade" in Portuguese - will sink to an all-time low, said Publico. - Sapa-DPA