Portugal has agreed a €78bn bailout with the EU (European Union) and the IMF (International Monetary Fund) becoming the third country of the 17-member Eurozone to require sovereign debt assistance.
In a television address on Tuesday night, José Sócrates, the country’s caretaker prime minister, said the agreement set tough conditions but he signalled that the terms were more lenient that the packages that were agreed with Greece and Ireland.
Sócrates said that Portugal would be given more time to reach its budget deficit targets than had previously been expected.
The deficit will have to be reduced to 5.9% of GDP this year, 4.5% in 2012 and 3% in 2013.
Portugal had previously agreed to reduce the deficit to 4.6% this year, 3% in 2012 and 2% in 2013.
Portugal's 2010 deficit was 8.6% of
GDP compared with its target of 7.3%. Eurostat, the EU’s statistics office had
classified €2bn in costs related to the 2008 seizure of Banco Portugues de
Negocios SA, as sovereign debt, and also costs related to public transport
were also reclassified.
Portugal's annual growth over the past decade was about 0.7%.
Sócrates resigned as prime minister in March after failing to get austerity measures through parliament and a general election will be held on June 5.
The agreement will have to be endorsed by the main opposition parties.
The interest rate to be charged on the loans has not been announced.
prime minister said the deal would not involve any cuts in public sector wages
or changes to the minimum national wage, nor any forced public sector job cuts.
reports that the parliament’s grand committee, which comprises party
representatives, will decide what Finland’s stance on bailouts should be before
the meeting of European Finance Ministers on May 16, two days before official
coalition talks start, said Finance Minister Jyrki Katainen, who is leading
government negotiations after his National Coalition Party won the most votes in
the country’s April 17 election.
The EU will
provide about two-thirds of the total bailout funds, the remainder coming for
Banco Espirito Santo Q1 Results: Ricardo Salgado, CEO of Portuguese bank, Banco Espirito Santo discussed a better than expected 49% drop Q1 in profits on Tuesday, as Portuguese banks are hit by a downgrade and the ongoing debt crisis. He added that unlike Spain where the rate of non-performing loans are picking up, in Portugal "non-performing loans are going up, but smoothly, at a much lower level than in Spain":
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