Update: Oct. 1: all this is nonsense. I was mislead by intoxications and lack of information. I can be a fool too at times and should be much more cautious, specially in a situation as confuse as this one. See my correction at my new blog For what we are... they will be. The only truth in all this is that there was a coup attempt, which failed, but everything else is wrong.
President Rafael Correa was hurt by tear gas shot by mutinied police. Not only the police is mutinying but his own party has blocked Correa's attempts to cut spending by reducing the public sector. While the Army has sided with the president, there are reports of riots in Quito and the airport has been shut.
Correa could technically rule up to two years without Parliament, assuming that this decision is approved by the Supreme Court, what is not likely.
Ecuador, like many European countries, has a budget problem (even after partial bankruptcy years ago) because it does not control the money it issues since the dollarization imposed by an unpopular right-wing government in the past. In order to take control of its own economy, it should be able to issue its own money, even if inflationarily.
Correa and the parliamentary majority (59/100 seats) belong to Alianza PAIS (Patria AltIva y Soberana), a moderate left-wing political party, that sympathizes with the Bolivarian system of Venezuela. However it is surrounded by US allies with right-wing governments: Colombia and Peru, being maybe the weakest piece of the Bolivarian bloc, organized in the ALBA economic group.
Sadly it is likely that the USA and its local puppets will try to take advantage of the situation, if they have not already helped to trigger it. A better solution is maybe that Correa is impeached or abdicates, as it is obvious that his new IMF-style policies have no support and governing by decree is not a viable solution anyhow (Ecuadoreans have already thrown away more than one such pretentious president)
Source for the main news item: Al Jazeera.