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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
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
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 public debt jumped to 93% of GDP in 2010 from 68% in 2007 and the
national statistics office in March estimated public debt will reach 97.3% of
GDP this year.
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
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.
State-owned Caixa Geral de Depósitos will not have to be privatised and no
special taxes on holiday bonuses are required. There will also be no change in
the minimum retirement age.
Portugal was facing the prospect of having to raise €7bn by June 15 to cover
bond maturities and the European Commission is looking to have approval of the
package at the May 16-17 meeting of EU finance ministers. However, that may not
be possible as Finland's new parliament, which has to approve the package, may
not have convened by then.
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.
“It would be detrimental for Finland to block a bailout,” Katainen told
reporters yesterday. “I’m going to defuse this impasse through talks with the
Bloomberg also reports that a budget expert from Germany’s governing coalition
and his counterpart from the biggest opposition party urged Portugal to consider
selling some of its gold reserves to ease its debt problems, the Passauer Neue
The EU will
provide about two-thirds of the total bailout funds, the remainder coming for
The Associated Press reports that Portugal is already one of Western Europe's
poorest countries, making further cuts unpalatable for many. Some 340,000
Portuguese are on the minimum monthly wage of €485 before tax, and 1.4m
take home less than €600 a month.
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":